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

Report: Goldman to settle DOJ probe into Malaysia's 1MDB for over $2B

Illustration: Lazaro Gamio/Axios

Goldman Sachs has agreed with the Department of Justice to pay over $2 billion for the bank's role in Malaysia's multi-billion dollar scandal at state fund 1MDB, Bloomberg first reported.

Why it matters: The settlement, expected to be announced within days, would allow Goldman Sachs to avoid a criminal conviction in the U.S. over the bribery and money laundering scandal that saw three of its former bankers banned for life from the banking industry by the Federal Reserve Board.

Updated 56 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Politics: Americans feel Trump's sickness makes him harder to trustFlorida breaks record for in-person early voting — McConnell urges White House not to strike stimulus deal before election — Republican senators defend Fauci as Trump escalates attacks.
  2. Health: The next wave is gaining steam.
  3. Education: Schools haven't become hotspots — University of Michigan students ordered to shelter-in-place.
  4. World: Ireland moving back into lockdown — Argentina becomes 5th country to report 1 million infections.

Trump threatens to post "60 Minutes" interview early after reportedly walking out

Trump speaks to reporters aboard Air Force One, Oct. 19. Photo: Mandel Ngan/AFP via Getty Images

President Trump tweeted on Tuesday that he was considering posting his interview with CBS' "60 Minutes" prior to airtime in order to show "what a FAKE and BIASED interview" it was, following reports that he abruptly ended the interview after 45 minutes of taping.

Why it matters: Trump has escalated his war on the media in the final stretch of his re-election campaign, calling a Reuters reporter a "criminal" this week for not reporting on corruption allegations about Hunter Biden and disparaging CNN as "dumb b*stards" for the network's ongoing coronavirus coverage.

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