ECB to announce plans to reduce QE

Inflation not expected to reach the central bank’s target of near 2% until 2019 at least

The European Central Bank will announce in October a six-month extension to its asset purchase programme but will cut how much it buys each month to €40 billion (Dh176 billion) from January, a Reuters poll of economists found.

The Eurozone has been performing stronger recently than at any time since the global financial crisis. That has fuelled expectations that the ECB will begin scaling back its quantitative easing (QE) programme after more than two years of bond buying during it which snapped up more than €2 trillion euros worth of mainly government bonds.

Growth rate

The Reuters poll of ECB watchers, taken September 1114, predicted that the resurgence in economic growth will be maintained over the coming year. But inflation is not expected to reach the central bank’s target of close to but just below 2 per cent until 2019 at least.

Mounting optimism about the Eurozone economy has led to a run-up in the euro exchange rate, posing a dilemma for the central bank as it tends to tamp down imported inflation.

ECB President Mario Draghi said at his September news conference that the central bank was looking at how to wind down its €60 billion of monthly asset purchases and would be ready with a plan by October.

While a Reuters poll on September 1 also flagged October as the most likely date, economists are now nearly unanimous. Only two of 52 surveyed thought the ECB would wait until December, when the current programme is set to end.

The ECB is expected to announce a six-month extension to QE, according to the consensus of 39 economists who answered an additional question.