The European Central Bank (ECB) has pledged to end its bond-buying activities in a few months as the region battles high inflation rates.
After looking at data since its previous meeting, the Governing Council, the main decision-making body of the ECB, judged in an April 14 meeting that net asset purchases under its asset purchase program (APP) must be concluded in the third quarter.
“The Governing Council also intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates and, in any case, for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation,” the ECB said.
Adjustments to ECB’s key interest rates will occur “some time after the end of the Governing Council’s net purchases under the APP.” Such rate adjustments will be gradual and will be determined by the Governing Council’s forward guidance, as well as its goal of maintaining inflation at 2 percent in the medium term.
The ECB has kept interest rates on main refinancing operations at zero percent, on marginal lending facility at 0.25 percent, and on the deposit facility at -0.50 percent.
Energy is expected to have the highest annual inflation rate at 44.7 percent, followed by food, alcohol, and tobacco at 5 percent, nonenergy industrial goods at 3.4 percent, and services at 2.7 percent.
ECB President Christine Lagarde indicated that announcements regarding interest rate hikes could start at ECB officials’ next meeting in June.
“The war in Ukraine has created an ominous new headwind,” said Chris Williamson, chief business economist at S&P Global. “Rates of growth have cooled markedly amid sanctions, soaring energy costs, and new supply constraints linked to the war.”