The European Central Bank (ECB) today decided to keep its policy stance unchanged, and at the same time was firm on plans to reduce its stimulus plan due to concerns over record high inflation. It also aims to address concerns about the economic downturn.
The ECB has been cutting money printing rates for months but has only outlined a loose schedule for the matter. The Russia-Ukraine conflict has been an important consideration as it has driven inflation further up.
In a recent meeting, the ECB confirmed its initial guidance by stating that it plans to reduce bond purchases and then end them in the third quarter. Interest rates, however, will only be raised after the end of the bond purchase and it will be gradual. The number of bond purchases in the third quarter, will be determined later.
The ECB is seen far behind compared to other major central banks, most of which started raising rates last year. Meanwhile, the U.S. Federal Reserve. is expected to raise rates by eight times or more over the next two years.
The ECB has bought nearly 5 trillion euros of public and private debt since 2015 to control inflation. Yet inflation has risen sharply in recent months, leaving policymakers in a dilemma as they try to raise interest rates.
Finally, the ECB maintains its official guidance that any rate hike will occur shortly after the end of bond purchases, a timeline that is said to lead to some number of weeks or months.
