European Central Bank gets ready to pull the plug on stimulus

Cornelia Mascio
Giugno 15, 2018

Bond purchases are now running at a maximum of €30 billion (R470 billion) per month, but will be lowered to €15 billion (R235 billion) per month from September, before being completely stopped at the end of December.

Elsewhere, the central bank left its interest rates unchanged, meaning a deposit rate of -0.4%.

The ECB began its asset purchase programme in 2015, years after the United Kingdom and USA took similar action to shore up their economies.

The ECB's president, Mario Draghi, is scheduled take questions from the media at 1:30 p.m. BST (8:30 a.m. ET) to discuss the bank's decision.

Draghi said there would be no prospect of an increase in the ECB's key lending rate - now 0.0% - until next summer at the earliest.

It said it expected rates to remain at their current levels "at least through the summer of 2019", adding that rates would stay put "as long as necessary to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path".

The euro lost more than a cent against the dollar after the news, with dealers contrasting the decision to leave rates unchanged in the eurozone for at least a year, with signs from the Federal Reserve that it planned two further increases in USA rates in 2018 and three more in 2019.

There's also a political challenge in the form of Italy's new government and weakening export demand.

"With the European Central Bank signalling that interest rates are unlikely to budge until the autumn of next year, investors' immediate focus seems to be on this forward guidance for interest rates, rather than the end of QE, which is reflected in the sharp drop in the euro".

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