The European Central Bank (ECB) has laid out plans to continue its €2.3trn asset purchase programme (APP) until the end of the year while indicating interest rates will remain at their current levels until the summer of 2019.
Having reviewed the progress towards a sustained adjustment of the path of inflation, the ECB's Governing Council said it will extend its APP and plans to keep interest rates at current levels.
Following its meeting today in Riga, the council has decided to continue making net purchases under the asset purchase programme at the current monthly pace of €30bn until the end of September this year.
After this, subject to incoming data confirming its medium-term inflation outlook, th central bank anticiaptes the monthly pace will be reduced to €15bn until the end of December 2018. Net purchases will then be stopped.
This comes after the ECB announced in October last year plans to halve its programme to €30bn a month of bond purchases with the scheme ending in September 2018 "or longer, if necessary".
The council intends to maintain its policy of reinvesting the principal payments from maturing securities purchased under the APP for an extended period of time after the end of the net asset purchases, and for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
Meanwhile, the council has also decided the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be kept the same at 0.00%, 0.25% and -0.40% respectively.
It expects the key ECB interest rates to stay at current levels "at least through the summer of 2019 and in any case for as long as necessary to ensure the evolution of inflation remains aligned with the current expectations of a sustained adjustment path".
Commenting on the outlook for inflation, ECP president Mario Draghi, said: "The euro area annual HICP inflation increased to 1.9% in May 2018, from 1.2% in April. This reflected higher contributions from energy, food and services price inflation.
"On the basis of current futures prices for oil, annual rates of headline inflation are likely to hover around the current level for the remainder of the year. While measures of underlying inflation remain generally muted, they have been increasing from earlier lows.
"Domestic cost pressures are strengthening amid high levels of capacity utilisation, tightening labour markets and rising wages. Uncertainty around the inflation outlook is receding.
"Looking ahead, underlying inflation is expected to pick up towards the end of the year and thereafter to increase gradually over the medium term, supported by our monetary policy measures, the continuing economic expansion, the corresponding absorption of economic slack and rising wage growth."
Today's monetary policy decisions maintain the current ample degree of monetary accommodation that the central bank hopes will ensure the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term.
May saw stronger-than-expected inflation, jumping to 1.9% from 1.2% in April, close to the ECB's target of 2%.
In an Investment Week Twitter poll ahead of the meeting, 72% of readers said the ECB would extend quantitative easing (QE) beyond the set September date, while 28% said they would halt it, indicating divided views across the investment community.
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