The European Central Bank (ECB) has announced that it will end its bond-buying stimulus programme this year.
The ECB said its Governing Council will continue to make net purchases under the asset purchase programme (APP) at the current monthly pace of EUR 30 billion until the end of September 2018.
“The Governing Council anticipates that, after September 2018, subject to incoming data confirming the Governing Council’s medium-term inflation outlook, the monthly pace of the net asset purchases will be reduced to EUR 15 billion until the end of December 2018 and that net purchases will then end.
Second, the Governing Council intends to maintain its policy of reinvesting the principal payments from maturing securities purchased under the APP for an extended period of time after the end of the net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation,” said the ECB in a statement.
EURUSD initially spiked higher on the apparent hawkishness before paring those gains and heading back below 1.18 to trade on the 1.1740 level, said Neil Wilson, chief market analyst for Markets.com.
The ECB launched its QE programme in early 2015, expanding its balance sheet to over EUR 2.6 trillion. The initial plan was to buy bonds worth EUR 1 trillion.
Marchel Alexandrovich, senior European economist at Jefferies, said: ”So the ECB is sending a signal that rates are to remain on hold for 6-9 months after QE finishes. Draghi’s last Press Conference and Q&A is on 24 October 2019 (he leaves the ECB at the end of October 2019) – so the focus will now be on whether he can raise rates before he departs.”
The ECB has also decided to maintain the current interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00 percent, 0.25 percent and -0.40 percent respectively.
“Today’s decision is a truly Solomonic compromise between the hawks and the doves. The hawks finally got their end-date for QE, while the doves still have their open door for more if needed. Nicely done,” said Carsten Brzeski, chief economist ING-DiBa.
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