Fiscal policy: ECB reduces ANLEIHENKÄUFE by half

The ECB wants to invest 15 billion euros a month less in bonds than previously. At the end of 2018, the purchase program should expire.

Fiscal policy: ECB reduces ANLEIHENKÄUFE by half

The European Central Bank (ECB) has announced a halving of its Anleihenkäufe. As of October, ECB will invest only 15 billion euros in government and corporate securities instead of 30 billion euros per month. One end of purchase program is planned unchanged at year-end 2018.

The precondition for this, however, is that inflation continues to develop as it did last. "The Governing Council is in any case willing to adjust all its instruments appropriately to ensure that inflation continues to move in a sustainable way towards Governing Council's inflation target," said ECB president Mario Draghi.

The programme, now based on 2.6 trillion euros, has been central instrument in past three years to strengn economy and to push up inflation that is too low from ECB's point of view. In meantime, economy is much better and inflation is also on up.

The ECB left key interest rate at a record low of 0.0 percent. Already since March 2016 it keeps this level. According to central bank, this should remain same until at least "beyond summer 2019" and a change of course will occur at earliest in autumn 2019.

ECB achieves inflation target

Economists expect ECB to reduce penalty rates for credit institutions first. Savers are expected to wait even longer for a first interest rate increase. On or hand, borrowers continue to benefit from relatively good conditions.

In August, consumer prices in euro area were two percent higher than in previous year, according to Eurostat statistical office figures. In medium term, ECB aspires to price stability at an inflation rate of just under two percent. That's far enough away from zero mark. Permanently low or even declining prices could lead businesses and consumers to postpone investment; This could weaken economy. Since spring, this inflation target has been reached again after it has been missed for many years.

The ECB economists left ir inflation forecasts unchanged. Accordingly, rate of inflation will be up to 2020, 1.7 per cent. Draghi was confident that inflation rate would be closer to target of just under two percent.

Draghi praises more stable banks

The chief of ECB also stressed that stricter rules and closer monitoring of Europe's banks had made it more resilient ten years ago since Lehman bankruptcy. "All in all, banks are now more stable," stated president of European Central Bank. "Can we be complacent about that? No. "

Many risks were migrated to world of shadow banks. There, supervisors and regulators would have to look more closely. Shadow banks are actors in financial markets that perform bank-like functions but are not banks and are refore not subject to regulation for credit institutions.

Date Of Update: 14 September 2018, 12:00

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