The European Central Bank has decided to stick with their plans to end bond purchases implemented since the Covid-19 outbreak. The ECB added, they will stop all purchases of its assets in stages over the summer if inflation fails to come down fast enough.
As expected, the ECB said it would accelerate the termination of bond purchases under the Asset Purchase Program that was implemented before Covid-19 to 40 billion euros in April, falling to 30 billion in May and 10 billion in June. After that, the ECB will determine its rate after looking at data on the third quarter.
According to the Governing Council, if the data does not support the expectation that the medium -term inflation outlook does not diminish even after the termination of bond purchases then they will decide to net purchases under the APP in the third quarter.
The Euro strengthened against the US dollar after the report was released to the trading level of 1.1114. Many expect the ECB to signal a greater readiness to tolerate high inflation in the short term, given the uncertainty about the economic outlook caused by the war in Ukraine and the Western response to it.
The ECB stuck with previous guidance on its key interest rates, whose key remained at -0.5%. Although there were hints by President Christine Lagarde at her previous press conference that she was open to the possibility of raising rates by the end of the year.
The ECB stated that they expect to maintain rates until it is believed that inflation can remain hovering around its target level of 2% in the medium term.
