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European Central Bank (ECB) President Mario Draghi takes part in a plenary debate on the ECB's Annual Report 2013 at the European Parliament in Brussels February 25, 2015. REUTERS/Francois Lenoir Reuters/Francois Lenoir

The bond buying initiative by the European Central Bank (ECB) that is aimed at stimulating the economy may come with risks, according to a report. The ECB had announced in January that the bank will be buying assets with a € 60 billion a month budget for the plan.

The ECB’s bond buying plan was aimed at combating the risks of low inflation. According to a report by Bloomberg, Standard & Poor's Paul Watters believes that the ECB’s plan runs the risk of “promoting stagflation in the euro area.”

According to the report, the bond buying plan has already affected bond holders, by pushing the yields down. The report expects that some companies may find it difficult to “make ends meet” if the bond yields continue to slide or remain low for a long time, including the risk of a lowered credit rating.

The report points out that the Euro region may be headed for a period of “sluggish growth and faster inflation.” Walters is said to be blaming the “aggressive monetary-policy stance” of the ECB as one of the factors that may have negative impact on the region. The other factor is supposedly the “rising inflation.”

The ECB continuously monitors the price movement in the region and recommends policy initiatives to rectify any difficult situation. In a press release posted in January, the ECB pointed out that the risk at that time was low inflation. The institution announced the bond buying plan with a target of about 2 percent inflation.

One of the main reasons for the fall in commodity prices and the risk of deflation in Europe is low oil price. Crude oil prices have fallen from around $ 100 in July 2014 to about $ 50 currently. The commodity price may be facing some resistance at around $ 55, a price that the commodity has been unable to breach in recent days. A global glut in the market is said to be the reason behind the fall in oil prices.

Investors who have bought bonds in Europe will be watching the effects of the bond buying initiative and its impact on the yields. The other concern for investors in the region is the massive debt by countries like Greece.

For questions/comments regarding the article, you may email the writer at s.trivedi@ibtimes.com.au