The ECB announced after today’s meeting in Riga, that it will leave its Quantitative Easing (“QE”) policy unchanged, at EUR30b per month, until the end of Sep18, by which time it will cut it to EUR15b. The QE will then continue at the pace EUR15b per month until the end of Dec18 and then end.
That being said, the ECB also appears somewhat reluctant to cut abruptly all liquidity to the economy, as it also announced that it will continue to invest principal repayments from maturing securities bought via QE, back into the market. Furthermore, it also announced that it will maintain its current, historically low, interest rate policy, well into the summer of 2019.
The EUR dropped only slightly in the aftermath of the news, probably because such an announcement had been anticipated by analysts for a while and had already been factored in by the market.
The announcement came only a few hours after the Federal Reserve raised U.S. interest rates for the second time this year, highlighting how a decade of increased cash availability in all major economies, is gradually coming to an end.
As a reminder, the ECB’s monetary policy objective, is to maintain “[…]inflation towards levels that are below, but close to, 2% over the medium term.“