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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

Senate Armed Services chair dismisses Trump threat to veto defense bill

Sen. Jim Inhofe poses with Judge Amy Coney Barrett on Oct. 21. Photo: Anna Moneymaker/pool/AFP via Getty Images

Sen. Jim Inhofe (R-Okla.), chairman of the Senate Armed Services Committee, told reporters Wednesday that he plans to move ahead with a crucial defense-spending bill without provisions that would eliminate tech industry protections, defying a veto threat from President Trump.

Why it matters: Inhofe's public rebuke signals that the Senate could have enough Republican backing to override a potential veto from Trump, who has demanded that the $740 billion National Defense Authorization Act repeal Section 230 of the Communications Decency Act.

Scoop: Uber in talks to sell air taxi business to Joby Aviation

Illustration: Sarah Grillo/Axios

Uber is in advanced talks to sell its Uber Elevate unit to Joby Aviation, Axios has learned from multiple sources. A deal could be announced later this month.

Between the lines: Uber Elevate was formed to develop a network of self-driving air taxis, but to date has been most notable for its annual conference devoted to the nascent industry.

Setting the Biden-era cybersecurity agenda

Illustration: Annelise Capossela/Axios

The Biden administration will face a wide array of cybersecurity challenges but can take meaningful action in at least five key areas, concludes a new report by the Aspen Cybersecurity Group.

Why it matters: Cybersecurity policy is a rare refuge from Washington's hyperpartisan dysfunction, as shown by the recent work of the bipartisan Cyberspace Solarium Commission. President-elect Joe Biden should have a real opportunity to make progress on shoring up the nation's cybersecurity and cyber capabilities without bumping up against a likely Republican-controlled Senate.

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