European finance ministers took two major actions today amid a darkening regional debt crisis: The Bank of England announced that it will buy £75 billion of government bonds in a new round of "quantitative easing" to stimulate the U.K.'s sluggish economy, and the European Central Bank decided to leave its benchmark interest rate unchanged at 1.5 percent for a third straight month (Britain also left its interest rate unchanged). Neither move is particularly surprising (though the British action came earlier than expected), bur markets appear to be reacting positively. Bloomberg reports that U.S. Treasuries are falling "for a third day as speculation European leaders are stepping up efforts to resolve the debt crisis reduced demand for the safest assets." Traders, in other words, are now more willing to take risks.
The Wall Street Journal explains that the U.K. has hinted for some time now that it would embark on a second round of quantitative easing because it's facing an "ailing economy menaced by a sovereign debt crisis in Europe, weak consumer demand at home and a slowdown in activity overseas." As for the E.C.B., analysts today seem to agree that outgoing president Jean-Claude Trichet is resisting calls to cut interest rates in order to tamp down inflation, which has risen in the euro area rose to an estimated three percent--well above the E.C.B. target of two percent. Trichet hinted that another E.C.B. rate cut isn't far off, however.