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Mario Draghi, president of the European Central Bank. Photo: Daniel Roland/AFP via Getty Images

Both the European Central Bank and the Bank of Japan were expected to begin normalizing monetary policy in 2019 — reintroducing interest rates that are not at or below zero. However, it looks like both will fail and may even go in reverse, potentially adding to their stimulus programs that have so far totaled more than $2.5 trillion and $3.5 trillion, respectively.

The big picture: With China announcing new stimulus measures and the Federal Reserve on pause, the quantitative tightening theme that was supposed to reshape markets in 2019 – draining liquidity from the global financial system, shaking stock prices and popping asset bubbles – may already have come and gone.

  • ECB president Mario Draghi spoke Thursday, announcing no changes to the bank's policy stance. The Bank of Japan on Wednesday lowered its growth and inflation forecasts and announced it would keep its negative interest rate policy and stimulus program intact.

Draghi recently pointed to weak growth across the euro zone that has continued to deteriorate.

What they're saying: FXStreet senior analyst Joseph Trevisani notes that a January measure of euro zone business sentiment and activity and a separate survey on the services sector both showed readings on the verge of contraction. 

  • Annual industrial production fell to -3.3% in November and is expected to have fallen further in December. The industrial sentiment index has declined from 9.7 in January to 1.1 in December.

As for Japan, a recent Bloomberg survey found 72% of economists think the BOJ will not raise interest rates at all this year and 79% don't believe it has the tools needed to fight a recession.

"The U.S. central bank has been raising rates for three years and ... they are at least sitting on a modest cushion if a recession occurs this year or next," Trevisani said in an interview. "The European Central Bank and the Bank of Japan have a bare plank."

The bottom line: Acknowledging the risks to growth and the overall economy, Draghi said Thursday the ECB is ready to again do whatever it takes.

  • “I don’t want to speculate about what contingency would call for a specific instrument, but if you look at the number of instruments we have in place now, we can conclude that it is not true that the ECB has run out of fuel or has run out of instruments."
  • "We have all our toolbox still available."

Go deeper

Scoop: U.S. begins denying Afghan immigrants

Afghan refugees on a bus bound for temporary housing after arriving in Greece. Photo: Byron Smith/Getty Images

The Biden administration has begun issuing denials to Afghans seeking to emigrate to the United States through the humanitarian parole process, after a system that typically processes 2,000 applications annually has been flooded with more than 30,000.

Why it matters: Afghans face steeper odds and longer processes for escaping to the U.S., despite the earlier sweeping efforts by the Biden administration to assist its allies. Immigration lawyers and advocacy groups say the government has set untenable barriers to a safe haven in the U.S.

2 hours ago - Politics & Policy

Dems invoke Robert Byrd to sell Manchin on Senate rules changes

Photo illustration: Shoshana Gordon/Axios. Photos: Diana Walker, Chip Somodevilla/Getty Images

A small group of Senate Democrats is privately invoking the legacy of late West Virginia Sen. Robert Byrd in an effort to sway Sen. Joe Manchin (D-W.Va.) to support their plans to change the chamber's rules, Axios has learned.

Why it matters: Manchin — who holds Byrd's Senate seat — has often referenced his predecessor's strong moral conviction and insistence on preserving the Senate as an institution, as justification for some of his tough positions.

House votes to ban imports from Xinjiang over forced labor concerns

House Speaker Nancy Pelosi. Photo: Anna Moneymaker/Getty Images

The House voted 428-1 on Wednesday to pass a bill that would ban all imports from the Chinese region of Xinjiang unless the U.S. government determines that the products were not made with forced labor.

Why it matters: Both the Trump and Biden administrations, as well as several foreign parliaments, have recognized China's repression of Uyghurs and other Muslim minorities in Xinjiang as genocide.

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