SHORT of cash?

Turn on the bank note printer and pay your bills in super fresh, crisp, fifty euro notes.

Looking back at this column over the last few weeks, I note my colleagues have, quite naturally, focused on the oil price and inflation, or the lack of it, as the case may be.

Does the fact the European Central Banks’ (ECB) Quantitative Easing (QE) program has failed to gain many column inches suggest they’re too late in turning on the printing press?

On Thursday, January 22, following much horse trading between the creditor and debtor nations, the ECB announced it would begin a program of large scale asset purchases.

The timing of the announcement reflected the increased levels of anxiety within Europe as deflationary pressures mount.

After all, should consumers start anticipating broad based price falls, spending patterns and economic activity would collapse.

Though not specifically targeting the currency, this exercise was surely designed to help weaken the euro and support inflation expectations.

It is also hoped these efforts will send sovereign bond yields lower, and with it, the cost of debt.

Given bond yields are already at record lows, however, it seems benefits here will be marginal.

In anticipation of this news, European equity markets had already bounced some ten per cent off their early January lows.

However, while the change in policy was widely anticipated, the ECB still managed to engineer a positive surprise by committing to purchase a larger than expected €60bn of assets each month.

On the shopping list are a combination of Government debt, asset-backed securities and covered bonds, with purchases beginning in March 2015 and lasting for a period of at least 18 months.

The option to extend the programme has also been left firmly on the table, with inflation expectations needing to return to their target of just below two per cent before asset purchases will cease.

In the medium-term, the increased liquidity provided by the ECB should support the banking system, and improve access to credit for the corporate sector.

We must caution the pace of progress in this area will be slow, however, at least banks will no longer be shrinking their loan books (the life-blood of an economy). Beyond this, the lower oil price will act as an effective tax-cut, driving down input costs and supporting profit margins.

It will also deliver a much needed boost to consumers, whom have a much greater propensity to spend rather than oil producers.

Despite the net-positive to growth weaker oil prices provide, looking ahead to 2015, the prospect of a first interest rate hike (at least in the US) is likely to drive continued stock market volatility.

We do expect patience to be rewarded, however, as markets start to appreciate that incremental moves higher in interest rates will be executed only at a very slow pace.

This should continue to encourage (muted) bank lending, feeding a slow but real recovery, as well as supporting asset prices.

The ECB have turned up late to the QE party but perhaps fashionably late.

Gary Welford is an assistant investment manager at Brewin Dolphin. The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin. No director, representative or employee of Brewin Dolphin accepts liability for any direct or consequential loss arising from the use of this document or its contents. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change.