020 7898 0500Interest rates were always expected to be kept on hold this time around and so the main highlight was always going to be the ECB’s announcement on the future of its QE programme. The commitment to purchase €30 billion bonds every month was set to end in September and the central bank confirmed this would be halved to €15 billion after that time.
However, what wasn’t expected was an end to the bond-buying programme. From December, the ECB will no longer purchase any new bonds, in a clear signal that a withdrawal of some fiscal stimulus is warranted. This would ordinarily have sent the euro soaring, but worries over the Eurozone economy and confirmation that rates would be kept on hold until the middle of next year sent it spiralling across the board.
Today’s inflation rate is expected to jump significantly, from 1.2% to 1.9% which would make it extremely close to the target rate of 2%. However, another day of euro weakening is not out of the question. Perhaps inflation could even come in above 2% and encourage the ECB to hike rates sooner than their stated intentions.
