ECB reduces bond purchases faster: key interest rate at zero percent

ECB reduces bond purchases faster: key interest rate at zero percent

Dhe European Central Bank (ECB) is paving the way for a turnaround in interest rates – but still leaves a lot of leeway for possible reactions to the consequences of the Ukraine war. As the Governing Council of the ECB, the central bank’s top monetary policy body, announced on Thursday after its interest rate meeting, the central bank’s bond purchases may be ended sooner than planned.

The third quarter of this year is mentioned, i.e. the period from July to September. There could be interest rate hikes “some time” after that. The central bank replaced the word “shortly” with “some time after” in its terminology for the time of the first interest rate hike after the end of the bond purchases.

ECB President Christine Lagarde emphasized that this would give the ECB more leeway as to how soon key interest rates would be raised after the end of bond purchases. “Some time later” could mean the week after or months later. They don’t want to set an exact schedule, but rather react “data-driven” – depending on how the economy develops in connection with the Ukraine war.

The ECB now intends to double monthly bond purchases as part of the APP program to EUR 40 billion in April. The central bank plans to invest EUR 30 billion in May and EUR 20 billion in June. In the third quarter, fresh security purchases could end altogether, depending on the situation. Originally, the ECB did not want to reduce the APP purchase volume again to 20 billion euros until October 2022.


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