European Central Bank unveils major stimulus program

The European Central Bank is kicking off a major stimulus program in hopes of shocking the eurozone's flat-lining economy back to life.

ECB President Mario Draghi said Thursday in a news conference in Frankfurt, Germany, that the bank would buy 60 billion euros ($70 billion) in public and private assets every month through September 2016.

The program, similar to the Federal Reserve's recent quantitative easing program, is designed to encourage lending to restart the continent's ailing economy. Soft demand in the eurozone is putting downward pressure on prices and wages, with the currency union's inflation rate falling 0.2 percent in December, far below the ECB's target rate of 2 percent.

Global investors had widely expected the ECB to unveil the QE program, with European financial markets pushing to a seven-year high on Thursday ahead of the bank's announcement.

The scale of the program, at euros 1.3 trillion ($1.5 billion), was larger than many had expected.

"The first details of the ECB's quantitative easing program suggest that it has met, and possibly even exceeded, expectations," said Jonathan Loynes, chief European economist with Capital Economics, in a note.

Although the ECB's new stimulus program is designed to end next year, Draghi also left room for extending it, saying that asset purchases would "continue until we see a sustained adjustment in the path of inflation."

U.S. stocks were mixed after the ECB announcement. As of 9:43 a.m. ET, the Dow Jones industrial average was up 34 points, or 0.2 percent, to 17,588. The S&P 50o was essentially flat, while the Nasdaq composite index fell 5 points to 4,663.

Claus Vistesen, chief European economist with Pantheon Macroeconomics, said QE is likely to boost equity prices. The Fed's three rounds of asset purchases, rolled out between 2008 and 2014, are credited with helping lift U.S. stocks to record levels.

The euro slipped immediately after Draghi's comments, declining 0.7 percent to $1.15 against the dollar. Peter Boockvar, chief market analyst with economic research firm The Lindsey Group, thinks the ECB policy is less about increasing bank lending in Europe than weakening the euro. That could help stimulate growth in the region by making eurozone countries' products cheaper overseas, boosting exports.

The stimulus plan calls for national central banks in Europe to buy their own sovereign debt, while the ECB will purchase a smaller amount of the securities. That is intended to make each country's central bankers more responsible in managing the debt, while allowing the ECB to offer some "loss-sharing" protection.

The arrangement is also likely more palatable to German officials, who have concerns about Europe's comparatively healthier economies being exposed to risk to the region's weaker "peripheral" economies.

But such limited loss-sharing could hinder the effectiveness of QE in Greece, Portugal and other smaller countries grappling with high unemployment and anemic growth, Loynes said.