ECB Extends Stimulus Program by Nine Months At Reduced Rate
December 08 2016 - 8:50AM
Dow Jones News
FRANKFURT—The European Central Bank decided Thursday to extend
its asset purchase program by nine months to the end of 2017.
It will maintain its monthly purchase volume at €80 billion
($86.2 billion) until March 2017 as planned, but will reduce it to
€60 billion as of April. It kept all its interest rates
unchanged.
The euro strengthened against the U.S. dollar in response to the
announcement, a sign that the decision to reduce the amount of
monthly purchases was a surprise.
"This is less than what was expected and will catch markets off
guard," said Patrick O'Donnell, an investment manager at Aberdeen
Asset Management.
With the eurozone entering a year of key elections, and
antiestablishment parties on the rise, investors had expected the
ECB to take a cautious approach to its bond buying program and
maintain the monthly purchase amount.
However, the ECB did give itself some room to reverse its taper
should next year throw up some unpleasant surprises.
"If, meanwhile, the outlook becomes less favorable or if
financial conditions become inconsistent with further progress
toward a sustained adjustment of the path of inflation, the
Governing Council intends to increase the program in terms of size
and/or duration," it said in a statement.
The statement said ECB President Mario Draghi will announce
changes to the structure of the bond buying program to make the
nine-month extension viable during his news conference.
The ECB left its main policy rate, the rate it charges for
regular loans to commercial banks, at 0% and left its rate on
overnight deposits at minus 0.4%.
Write to Todd Buell at todd.buell@wsj.com
(END) Dow Jones Newswires
December 08, 2016 08:35 ET (13:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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