Monday

13th Jul 2020

ECB slows down eurozone support scheme

  • "We must be patient and persistent," said Mario Draghi (r) (Photo: ECB)

The European Central Bank (ECB) took a first step on Thursday (26 October) towards the end of its emergency bond-buying programme to boost the eurozone economy.

From next January, the ECB will reduce purchases to €30 billion each month, down from €60 billion now.

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It did not, however, fix an end date to the programme - which was launched in 2015 - and said it was ready to step it up if the eurozone economy was vulnerable again.

"The recalibration of our asset purchases reflects growing confidence in the gradual convergence of inflation rates towards our inflation aim," ECB President Mario Draghi said at his monthly press conference in Frankfurt.

The ECB's objective is an inflation rate of "below but close to 2 percent".

Draghi insisted that the level of inflation - the ECB's main concern - would be "V-shaped" in the coming month, at 1.5 percent this year, 1.2 percent next year and 1.5 percent in 2019.

He noted that growth in the eurozone was "increasingly robust and broad-based" but that an "ample degree of monetary stimulus remains necessary."

"We stand ready to increase the APP in terms of size and/or duration," he said, referring to the asset purchase programme, the bond-buying scheme also known as quantitative easing (QE).

The ECB chief insisted that the programme was "flexible enough" and could be adjusted to "carry through smoothly."

He said that the improvement of the overall economic situation and labour market was not "self-sustained yet" and still relied "very much on our monetary policy support."

"We must be patient and persistent," he said, adding that the decision to reduce the level of the APP while keeping it "open-ended" reflected that state of mind.

Draghi also stressed that the ECB will reinvest the money from the bond-buying programme in a "flexible and timely manner" where the bond were issued.

The ECB also kept the eurozone interest rates unchanged and said that it expected them to "remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases."

Asked about Catalonia, Draghi said that the ECB was looking at the situation "with great attention".

He said that the importance of the crisis between the Spanish government and the Catalan separatists was "significant" but that it would be "premature" to "conclude now that there would be stability risk" for Spain and the eurozone.

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