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The ECB will put an end to the asset purchase program at the end of the year

Draghi extends three months the stimulus that has buttressed the economy but it puts an expiration date if inflation and oil do not twist

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The ECB will put an end to the asset purchase program at the end of the year

Europe and world rediscover political risks: Italy and last G-7 are evidence. Eurozone recovery loses bellows. Markets are getting more and more nervous. Inflation is not over again despite rise in price of oil. And yet, European Central Bank is close to withdrawal of stimulus: The procurement plan is extended three months (from possible end in September to December) but with a lower intensity of 15 billion. And most importantly, ECB has now put final date to European QE, which totals 2.4 trillion euros (more than twice Spanish GDP) since 2015. Debt purchases and or assets will end at end of year, unless inflation and or indicators give surprises. And first increases in interest rates could come in summer of 2019.

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The end of an era is approaching: multi-millionaire programs of asset purchases, negative interest rates, one of all kinds of extraordinary policies for an extraordinary crisis that has lasted 10 years and has left scars that follow red hot. "The Governing Council will continue to make net asset purchases at rate of 30 billion per month until end of September 2018. The Governing Council anticipates that, after that date, and subject to data confirming ECB's forecast of mid-term inflation, monthly net purchases rate will be reduced to 15 billion euros until December 2018, and n net purchases end ", notes ECB's note prior to press conference to be offered by its president, Mario Draghi. Interest rates remain intact, in negative terrain.

The stock exchanges have made progress by Draghi's tone: The move was within expected and head of ECB admits that eurozone "still needs a significant monetary stimulus." In addition, Draghi links withdrawal of extraordinary measures to inflation continuing to approach ECB's objective (2%). The euro, yes, weakens: it has lost 1.17 dollars per unit. But guarantees of Draghi have avoided a major jolt.

At April meeting, Draghi made it clear that Eurobanco was not discussing next steps. But from that moment on, his advisors have been entreabriendo door to withdrawal of extraordinary measures, in particular asset programme (QE) which has anestized markets since 2015. The bank's chief economist, Peter Praet, released a first clear signal a few days ago. The Hawks — supporters of withdrawing stimulus as soon as possible — have been waiting for months. Draghi and Vice President Luis de Guindos, which premiered in an extraordinary Council held in Riga (Latvia), mark new Central Bank roadmap.

And yet ECB has a dilemma ahead. Inflation is recovering from rise in oil prices, but underlying index (without most volatile elements, and that for Draghi has been fundamental fact throughout great Crisis) remains anchored around 1% and with few visions of encouraging to rise. The eurozone grew 2.3% in 2017, but revival begins to show signs of fatigue. Oil has risen by around 20% since February; That rise is about 30% because of euro's weakness. The rise of crude oil allows to approach mandate of Eurobanco (below but close to 2% of inflation), but at same time can make a dent in recovery, after a start of year doubtfully, that has made disappear Euroforia, optimism associated to activity Economic.

The last data, in short, are mixed: neir good nor bad. Industrial production in eurozone slows down, but employment is still recovering. Frankfurt has to give some indication as to wher it is just a correction in pace of growth or perhaps a possible risk of relapse in recession. The uncertainties are re, in indicators of confidence and in levels of volatility of market. And especially in Italy, a genuine headache for European institutions and especially for a ECB chaired by an Italian, Draghi. "Uncertainties are rising, above all by geopolitical factors, although risks in eurozone are balanced," Draghi sentenced.

Negative interest rates are likely to remain re for at least a year. And markets are still a few months of anessia linked to European QE. But any of those political risks (Italy or Trump's protectionism, for example) can cause a new jolt. New era in ECB, yes. But that of Rafael Sánchez-Ferlosio: "The New Age; The old misfortune. "


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