That suggested the plan to reduce monthly bond purchases from €60bn until September 2018 (“or beyond, if necessary”) to €30bn had already been priced in. ECB officials had leaked details of the plan to Bloomberg and the Financial Times prior to Thursday’s board meeting.
“Over the past few months the ECB have successfully communicated their intention to scale down the asset purchases programme from next year, in an effort to avoid a taper tantrum,” said Anna Stupnytska, global economist at Fidelity International.
Though the announcement is a sign the ECB is intent on winding down its asset purchasing programme over time, it is still firmly in easing mode. This was confirmed by the bank’s intent to “reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of its net asset purchases, and in any case for as long as necessary,” the ECB’s monetary policy statement said.
“This will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.”
The ECB justified its extension of QE by pointing to lacklustre inflation in the eurozone. “Given the remaining slack in the labour market, inflation is far below the target and is likely to rise only at a very sluggish pace,” said Stupnytska.
“Overall, there are plenty of reasons for the ECB to carry on with easy policy for longer. I continue to expect a very gradual withdrawal of policy accommodation with asset purchases likely to continue beyond the horizon of the new programme announced today, i.e. beyond September 2018.”
