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Illustration: Aïda Amer/Axios

The hope for interest rate cuts and more quantitative easing in September was not enough to placate the market on Thursday as stocks fell in the U.S. and Europe after an announcement from ECB President Mario Draghi that gave the distinct impression the central bank would ease monetary policy at its next meeting.

The state of play: Most analysts said the reaction from the market was due to Draghi sounding more hawkish than expected, but investors may simply be waking up to the idea that central bank easing isn't what it once was, and the ECB's policy tool kit looks exhausted.

What they're saying: "Negative interest rates and more QE will only have a small impact, but given there are no other alternatives central banks really don’t have any other options," Torsten Sløk, chief economist at Deutsche Bank Securities, tells Axios in an email.

  • "The big option is of course fiscal policy but that is up to the politicians. And for political reasons there is very little room to maneuver for fiscal policy at the moment both in the US and Europe."
  • Joseph Trevisani, senior analyst at FX Street, adds: "Europe's problems are not cyclical. They are long-term weak demand, slow growth and the scarcity of worthwhile investments. These cannot be addressed by negative rates."

Be smart: Recent academic papers examining the impacts of quantitative easing show that it is no longer a useful instrument.

  • A January report from Princeton University researchers Markus K. Brunnermeier and Yann Koby suggests there comes a point at which lowering interest rates actually makes things worse, and "depresses rather than stimulates the economy."
  • The ECB's current -0.4% interest rate has clearly not created a sustainable stimulus, so it's possible that lowering it further could hurt rather than help the eurozone, further exaggerating the economic slowdown.

What's next: Market heavyweights, including BlackRock chief investment officer of global fixed income Rick Rieder and Ethan Harris, Bank of America-Merrill Lynch’s head of global economic research, expect the ECB may have to start buying stocks to keep the economy from stagnating.

  • But with a more limited pool of equities to choose from, given Europe's relatively small stock market, that may not enough.

Go deeper: Germany is Europe's most economically dangerous country

Go deeper

Tina Reed, author of Vitals
4 hours ago - Health

FDA panel endorses shot of J&J booster for adults

Photo: Wolfgang Kumm/picture alliance via Getty Images)

Members of the Food and Drug Administration's vaccine expert panel on Friday unanimously endorsed a booster shot for adult recipients of Johnson & Johnson's COVID-19 vaccine at least two months after the initial dose.

Why it matters: The advisory committee raised concerns about a dearth of data to support their decision but ultimately decided to support an additional shot for those over 18.

Capitol Police officer indicted for obstructing Jan. 6 investigation

Trump supporters clash with police and security forces as people try to storm the Capitol on Jan. 6. Photo: Brent Stirton/Getty Images

A U.S. Capitol Police officer has been indicted on obstruction of justice charges for allegedly helping hide evidence of a participant's involvement in the Jan. 6 riot.

Driving the news: Officer Michael A. Riley, 50, is accused of telling the unidentified participant, referred to as "Person 1," in the Jan. 6 riot to delete posts from Facebook, which showed them in the Capitol during the attack.

7 hours ago - World

British MP dies after being stabbed while meeting constituents

Police outside Belfairs Methodist Church in Leigh-on-Sea, England, on Oct. 15. Photo: John Keeble/Getty Images

David Amess, a Conservative Party lawmaker in the U.K., was fatally stabbed Friday while meeting with local constituents in a church in eastern England, according to AP.

The big picture: Police said a man, 25, was arrested for the stabbing in Leigh-on-Sea and is being held on suspicion of murder. A knife was also recovered at the scene, authorities said.

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