European Central Bank to end quantitative easing by end of 2018

ECB calls halt to quantitative easing, despite 'soft' euro

The European Central Bank just called time on its €2.5 trillion stimulus programme

The New Zealand dollar rose against a broadly weaker euro after the European Central Bank said it may not hike interest rates until late 2019 while stronger United States retail sales data also helped lift the greenback.

The ECB then upstaged its peer by unveiling plans to wind down its quantitative easing programme but clung on to its dovish leaning, slashing its 2018 growth forecast and warning that a rate rise is unlikely until at least September 2019.

It expects the key European Central Bank 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".

Tumpel-Gugerell added that the European Central Bank suggestion that rates would remain where they are until the end of next summer was the first time in many years that the European Central Bank had been explicit on tying rate moves to dates.

The euro was down 1.7 per cent against the dollar at $1.1592. The ECB left interest rates at record lows. The program has helped raise inflation and growth in the eurozone, and some investors appear to worry about the consequences of removing that support.

The size of the stimulus was enormous: At €2.7 trillion, it rivals the entire value of the French economy past year.

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Mario Draghi, the ECB's president, said at the end of a meeting of the bank's governing council in Latvia, that the QE programme had succeeded in its aim of putting inflation on course to meet its target of being below but close to 2%.

"Uncertainties related to global factors, including the threat of increased protectionism, have become more prominent, the risk of persistent, heightened financial market volatility warrants monitoring", said Mr Draghi.

For years since the Great Recession, central banks around the world have thrown massive amounts of stimulus at markets, chiefly through the purchase of billions of dollars of bonds each month. However, one could imagine that it may have a weakening effect on the euro, especially in comparison with the Dollars, where the Fed raised interest rates yesterday.

The ECB has already spent well over than 2 trillion euros buying bonds since 2015 and has kept its deposit rate below zero, effectively charging banks for their idle cash, for four years in a bid to revive inflation.

The euro had initially risen during the meeting, after the European Central Bank said it would phase out its financial crisis-era stimulus programme for the 19-country region by the year-end. "It's a new instrument of monetary policy".

"The implementation of tariffs on China is one of several fronts that the USA is battling on the issue of trade", said Tai Hui, chief Asia-Pacific market strategist at JPMorgan Asset Management, referring to the Trump administration's tough stance towards Canada and Europe.

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