ECB to end quantitative easing by end of 2018

Source: Xinhua    2018-06-15 04:33:47

FRANKFURT/RIGA, June 14 (Xinhua) -- Not much surprisingly, the European Central Bank (ECB) announced Thursday that it would very likely draw a full stop to its massive asset purchase -- crisis-era stimulus program, by the end of this year, since the progress towards a sustained adjustment in inflation of eurozone has been substantial so far.

The ECB plans to halve the monthly net asset purchase to 15 billion euros (17.4 billion U.S. dollars) from October, and to end it by December.

It, however, is subject to incoming data confirming ECB's medium-term inflation outlook, according to the statement released after the Governing Council meeting of the ECB in Latvia's Riga.

Meanwhile, the ECB expects that the benchmark deposit interest rates for the euro area will remain at present levels at least through the summer of 2019.

Despite that infrequent explicit indication of rates moves in its forward guidance, ECB President Mario Draghi told press that the timing to raise rates had not been discussed in Riga.

"The intention of our interest rate formulation is to give it a time dimension, but not a precise one," he said.

"Significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term," Draghi underlined.

With sizeable stock of acquired assets, worth 2.4 trillion euros as of May, together with reinvestments of the principal payments from maturing securities purchased after the end of asset purchase program, as well as forward guidance on interest rates, the ECB intends to ensure the ample degree of monetary easing for an extended period of time.

Asset purchase program is not disappearing, instead, it remains a normal instrument of monetary policy, said Draghi.

"There is the collective intention of the Governing Council to avoid any unwarranted tightening of financial conditions," he added, confirming that the decision was made unanimously.

While the U.S. Federal Reserve pursuits hawkish shift, the generally dovish stance of the ECB weighs markedly on the euro, which plunged by around 1.8 percent against the U.S. dollar since noon of Thursday.

As regards outlook of the euro area, the ECB revised the GDP growth projection for 2018 down to 2.1 percent, followed by even lower growth rate of 1.9 percent and 1.7 percent in 2019 and 2020 respectively.

"Uncertainties related to global factors, including the threat of increased protectionism, have become more prominent," Draghi emphasized, adding that the risk of persistent heightened financial market volatility should be closely monitored.

In contrast, the ECB is increasingly confident about the inflation development in eurozone towards its aim.

It revised annual inflation forecast notably up for 2018 and 2019, namely to 1.7 percent for both years, basically meeting ECB's policy aim -- below but close to 2 percent in the medium term.

Editor: Chengcheng
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ECB to end quantitative easing by end of 2018

Source: Xinhua 2018-06-15 04:33:47

FRANKFURT/RIGA, June 14 (Xinhua) -- Not much surprisingly, the European Central Bank (ECB) announced Thursday that it would very likely draw a full stop to its massive asset purchase -- crisis-era stimulus program, by the end of this year, since the progress towards a sustained adjustment in inflation of eurozone has been substantial so far.

The ECB plans to halve the monthly net asset purchase to 15 billion euros (17.4 billion U.S. dollars) from October, and to end it by December.

It, however, is subject to incoming data confirming ECB's medium-term inflation outlook, according to the statement released after the Governing Council meeting of the ECB in Latvia's Riga.

Meanwhile, the ECB expects that the benchmark deposit interest rates for the euro area will remain at present levels at least through the summer of 2019.

Despite that infrequent explicit indication of rates moves in its forward guidance, ECB President Mario Draghi told press that the timing to raise rates had not been discussed in Riga.

"The intention of our interest rate formulation is to give it a time dimension, but not a precise one," he said.

"Significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term," Draghi underlined.

With sizeable stock of acquired assets, worth 2.4 trillion euros as of May, together with reinvestments of the principal payments from maturing securities purchased after the end of asset purchase program, as well as forward guidance on interest rates, the ECB intends to ensure the ample degree of monetary easing for an extended period of time.

Asset purchase program is not disappearing, instead, it remains a normal instrument of monetary policy, said Draghi.

"There is the collective intention of the Governing Council to avoid any unwarranted tightening of financial conditions," he added, confirming that the decision was made unanimously.

While the U.S. Federal Reserve pursuits hawkish shift, the generally dovish stance of the ECB weighs markedly on the euro, which plunged by around 1.8 percent against the U.S. dollar since noon of Thursday.

As regards outlook of the euro area, the ECB revised the GDP growth projection for 2018 down to 2.1 percent, followed by even lower growth rate of 1.9 percent and 1.7 percent in 2019 and 2020 respectively.

"Uncertainties related to global factors, including the threat of increased protectionism, have become more prominent," Draghi emphasized, adding that the risk of persistent heightened financial market volatility should be closely monitored.

In contrast, the ECB is increasingly confident about the inflation development in eurozone towards its aim.

It revised annual inflation forecast notably up for 2018 and 2019, namely to 1.7 percent for both years, basically meeting ECB's policy aim -- below but close to 2 percent in the medium term.

[Editor: huaxia]
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