The European Central Bank, as expected, moved Thursday to wind down its emergency asset buying program in early 2022 while softening the blow by boosting purchases under a different program.
In what’s been billed as “Super Thursday” for global central banks, it was the Bank of England that sent shock waves, becoming the first major central bank to deliver an interest rate increase since the pandemic began by unexpectedly lifting its key benchmark 15 basis points to 0.25%.
See: Pound, gilt yields rise after Bank of England makes surprise rate hike
The ECB said its Governing Council decided that asset buying under the Pandemic Emergency Purchase Program, or PEPP, would slow further in the first quarter of next year and come to a halt in March, which was previously identified as a potential expiration date. The ECB said it would double the monthly pace of buying under its longer running Asset Purchase Program, or APP, to 40 billion euros in the second quarter of next year, then scaling back to 30 billion euros in the third quarter and 20 billion euros in the fourth quarter.
That means the ECB will reduce its total net purchases from an average of €92 billion a month between September and November this year to less than half that pace by April,” said Andrew Kenningham, chief Europe economist at Capital Economics, in a note. “While this falls well short of the ‘full taper’ which the Fed has now stepped up, it is still a big reduction in policy support.”
The moves, however, were widely anticipated, he noted, though the reduction in purchases under APP to €20 billion a month in the fourth quarter of next year may have been a bit more hawkish than expected.
The ECB left interest rates unchanged though and reiterated that rates wouldn’t rise until it had halted asset purchases.
ECB President Christine Lagarde will hold a news conference at 2:30 p.m. Frankfurt time, or 8:30 a.m. Eastern.
