ECB announces end of QE

Source: Dukascopy Bank SA
On Thursday, at 12:45 GMT, the European Central Bank published its Main Refinancing Rate and Monetary Policy Statement. In general, the bank kept its rate at 0.00%, but revealed that it would end its quantitative easing policy.

Quoting the statement: "In the first quarter of 2022, the Governing Council is conducting net asset purchases under the PEPP at a lower pace than in the previous quarter. It will discontinue net asset purchases under the PEPP at the end of March 2022.

In line with the step-by-step reduction in asset purchases decided on in December 2021 and to ensure that the monetary policy stance remains consistent with inflation stabilising at the Governing Council's target over the medium term, monthly net purchases under the APP will amount to €40 billion in the second quarter of 2022 and €30 billion in the third quarter. From October onwards, the Governing Council will maintain net asset purchases under the APP at a monthly pace of €20 billion for as long as necessary to reinforce the accommodative impact of its policy rates. The Governing Council expects net purchases to end shortly before it starts raising the key ECB interest rates.

The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively.

The Governing Council will continue to monitor bank funding conditions and ensure that the maturing of operations under the third series of targeted longer-term refinancing operations (TLTRO III) does not hamper the smooth transmission of its monetary policy. The Governing Council will also regularly assess how targeted lending operations are contributing to its monetary policy stance. As announced, it expects the special conditions applicable under TLTRO III to end in June this year."

Released Document

Monetary policy decisions

On the release, the EUR/USD dropped 28 base points or -0.24%. However, by 13:00 GMT, the currency exchange rate had returned to the 1.1295 level, where it fluctuated before the announcement.

On a larger scale, the rate remains near 1.1300.

Initial Reaction

Larger scale situation

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