ECB Ends Crisis-fighting Bond-buying Scheme

Frankfurt am Main, (APP - UrduPoint / Pakistan Point News - 13th Dec, 2018 ) :The European Central Bank on Thursday formally ended its massive bond-buying scheme, withdrawing a crucial element of support for the economy even as clouds gather over the eurozone outlook.

In a long-awaited move, the Frankfurt institution confirmed that it would stop buying government and corporate bonds at the end of December after a gradual winding down of the asset purchases in recent months.

As expected, the bank's governing council also voted in its final meeting of the year to keep interest rates at record lows "at least through the summer of 2019".

The governors' decision to end the asset purchases is a landmark step on the path towards policy normalisation after years of extraordinary stimulus, but it comes at a sensitive time as eurozone growth is slowing and threats to the region's economy are mounting.

The bank's so-called "quantitative easing" (QE) scheme, a crisis-era measure designed to pump cash into the financial system, has seen the ECB purchase some 2.6 trillion Euros ($3.0 trillion) in bonds since 2015.

The programme has been credited with stoking growth and bringing the ECB closer to its inflation goal of just under 2.0 percent.

But after the 19-nation single Currency area saw unexpectedly powerful growth in 2017, expansion has since fallen back, dropping to just 0.2 percent between July and September.

Attention now turns to ECB chief Mario Draghi's press conference at 1330 GMT, where he will likely seek to reassure markets that the eurozone is robust enough to withstand a string of risks, from concerns over Italy's budget and France's "yellow vests" protests to fears of a disorderly Brexit and US President Donald Trump's protectionist trade policies.

Observers say Draghi is likely to stress that despite the end of QE, the ECB will continue to support the eurozone economy through ultra-low interest rates and by reinvesting the cash from maturing bonds for a long time to come -- keeping borrowing costs low.

The bank is also set to unveil its latest growth and inflation forecasts, which for the first time will include projections for 2021.