The European Central Bank (ECB) has put an end to its billion-dollar Anleihenkäufe at year-end 2018. To this end, central bank intends to reduce volume of monthly purchases from October to 15 billion euros from currently 30 billion euros. At end of December, program could completely expire. This was decided by Governing Council on Thursday at its external meeting in Riga, Latvia, as central bank in Frankfurt shared.
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At same time, ECB shared fact that key interest rate should be kept at historical low of 0.0 percent. This is going to stay “at least summer 2019 over” so, it said. The deposit interest for banks remains at minus 0.4 percent.
Since beginning of bond purchase program in March 2015, ECB has acquired securities with a total value of well 2.4 trillion euros. With measure, central bank has been trying for years to strengn economy in 19 euro countries. The aim is to achieve price stability at an inflation rate of just under 2.0 percent – far enough away from zero mark.
Permanently low or even declining prices could lead businesses and consumers to postpone investment. That could stall economy. In May, annual inflation rate in euro area, following an initial estimate by Eurostat statistical office, increased above all from higher energy prices to 1.9 percent.
Weakened economy concerned ECB
However, economic situation in common currency area has weakened in first three months of this year. The monetary authorities are concerned about trade dispute between United States on one hand and European Union and or countries on or. Customs barriers could hit export industry. The Europe-critical coalition of five-Star Movement and right-wing populist league in Italy is also responsible for unrest.
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The fact that ECB is still looking at end of ANLEIHENKÄUFE also has to do with fact that programme is gradually pushing its limits. In several major euro countries, including Germany, share of government bonds acquired by ECB is approaching a threshold of one third of all circulating debt instruments. This limit has been set by ECB itself in order not to be exposed to accusation that it is running state finance with help of music press.
