ECB tapers bond buying by €30 billion per month, but extends programme by 9 months

Photo: Getty/Ralph Orlowski
  • European Central Bank cuts bond-buying programme to €30 billion per month, down from €60 billion previously.
  • The move had been widely expected in the markets.
  • President Mario Draghi will give a press conference to explain ECB’s thinking at 1.30 p.m. BST (2.3o p.m. CET; 8.30 a.m. ET).

The European Central Bank on Thursday announced that it will further taper its bond-buying but extended quantitative easing until at least September 2018, as had been widely forecast prior to the decision.

The ECB announced that it will implement a reduction in its bond-buying of €30 billion per month, down from the current level of €60 billion per month to just €30 billion per month. The reduction in purchases will come into force in January 2018, the central bank said in a statement, saying that QE will continue for nine months longer than previously announced.

“As regards non-standard monetary policy measures, purchases under the asset purchase programme (APP) will continue at the current monthly pace of €60 billion until the end of December 2017,” the ECB said in a statement.

“From January 2018 the net asset purchases are intended to continue at a monthly pace of €30 billion until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.”

Total bond purchases are on track to reach €2.28 trillion by the end of this year, which means spare capacity will only be just over €200 billion — less than the forecast purchase amount for 2018 of €270 billion.

While the ECB was widely expected to reduce the quantity of bonds it buys, there was little chance it would change interest rates, and the bank left its deposit rate at -0.4%, while its main refinancing rate remained at 0.0%.

The euro dropped sharply on the decision, falling below the 1.18 level against the dollar, as the chart below illustrates:

At 1.30 p.m. BST (2.3o p.m. CET; 8.30 a.m. ET) ECB President Mario Draghi will give a press conference explaining the bank’s decisions and taking questions from journalists.

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