The Limited Times

Now you can see non-English news...

Inflation: ECB wants to throttle bond purchases faster than announced

2022-03-10T13:10:13.264Z


Inflation: ECB wants to throttle bond purchases faster than announced Created: 03/10/2022, 14:04 The European Central Bank will discuss its future monetary policy on Thursday. © Boris Roessler/dpa In view of the high inflation, the ECB is taking another step towards exiting its ultra-loose monetary policy. Frankfurt - Europe's currency watchdogs are stepping on the brakes on their bond purchas


Inflation: ECB wants to throttle bond purchases faster than announced

Created: 03/10/2022, 14:04

The European Central Bank will discuss its future monetary policy on Thursday.

© Boris Roessler/dpa

In view of the high inflation, the ECB is taking another step towards exiting its ultra-loose monetary policy.

Frankfurt - Europe's currency watchdogs are stepping on the brakes on their bond purchases despite new risks for the economy as a result of the Ukraine war.

After a temporary increase, the purchase volume of the APP program will be reduced again to 20 billion euros at the end of June and could be completely ended in the third quarter of 2022.

With this decision on Thursday, the Governing Council of the ECB reacted to the persistently high inflation rates.

In Germany, the annual inflation rate climbed back above the five percent mark at 5.1 percent in February.

In the euro zone, consumer prices in February were 5.8 percent higher than in the same month last year.

Inflation: The ECB is actually aiming for an inflation rate of around two percent

In the medium term, the ECB is aiming for a stable common currency with a price increase of 2 percent.

Higher rates of inflation reduce consumers' purchasing power.

You can then afford less for one euro.

Critics have long accused the ECB of fueling inflation with its flood of cheap money.

Monthly bond purchases under the APP are set to double to €40 billion in April.

The ECB plans to invest EUR 30 billion in May and EUR 20 billion in June.

Inflation: ECB will phase out bond purchases at the end of March

The central bank based in Frankfurt had already announced in December that it would only buy additional securities until the end of March 2022 as part of its PEPP bond purchase program launched during the corona pandemic.

However, the ECB intends to reinvest funds from expiring PEPP papers by at least the end of 2024, and funds from expiring APP papers are also to be reinvested for a longer period of time.

The monetary authorities had increased the volume of the particularly flexible PEPP purchase program, which has been running since March 2020, twice from initially 750 billion euros to ultimately 1.85 trillion euros.

Bond purchases by the ECB help states and companies: they do not have to offer such high interest rates for their securities if a central bank appears as a large buyer on the market.

For the time being, nothing will change in terms of interest rates: the key interest rate in the euro area will remain at a record low of zero percent.

If banks park funds at the ECB, they have to pay 0.5 percent interest.

The central bank has decided that it will only raise interest rates again when it is no longer investing fresh money in the purchase of state and company securities.

Some economists are expecting the first rate hike at the end of this year.

also read

ECB maintains ultra-loose monetary policy

Inflation in Germany and in the euro area remains at a high level.

Demands on the ECB to take countermeasures are becoming ever clearer.

But the central bank remains true to its course.

ECB maintains ultra-loose monetary policy

Joachim Nagel: Inflation over 4 percent likely

The Deutsche Bundesbank expects inflation to rise to more than four percent in Germany this year.

Your new President is in favor of early action by the ECB.

Joachim Nagel: Inflation over 4 percent likely

Inflation: Ukraine war drives up inflation

However, the prospects for the economy have clouded over.

Russia's war against Ukraine is also hitting Europe's economy, which is recovering from the consequences of the corona pandemic, with force.

For this reason, Europe's currency watchdogs have emphasized their ability to react flexibly to further developments in the past few weeks.

"The ECB is ready, within the scope of its responsibilities, to take all necessary measures to ensure price stability and financial stability in the euro area," ECB President Christine Lagarde said two weeks ago.

*fr.de is an offer from IPPEN.MEDIA

Source: merkur

All news articles on 2022-03-10

You may like

News/Politics 2024-01-31T14:21:06.411Z
Life/Entertain 2024-02-26T14:54:12.306Z

Trends 24h

News/Politics 2024-03-28T06:04:53.137Z

Latest

© Communities 2019 - Privacy

The information on this site is from external sources that are not under our control.
The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.