The European Central Bank (ECB) outlined plans to end its massive stimulus program by the end of the year on Thursday.
The bank anticipated that the monthly purchase program will be extended through to the final quarter of the year, though at a lower pace.
Market participants have described this month’s meeting as being “live,” following remarks by the central bank’s chief economist that the ECB would start preparing to end its stimulus. ECB’s Peter Praet said last week the bank would be discussing how to unwind its asset purchase program — which was implemented in 2015 to revamp the euro economy in the wake of the 2011 sovereign debt crisis.
Germany’s ECB representative, Jens Weidmann, also said last week that he expects the trillion-euro program to come to an end before the end of this year.
At the moment, the quantitative easing (QE) program is scheduled to last until September and the bank purchases around 30 billion euros ($35 billion) of government and private debt every month. This is aimed at boosting lending in the region and stimulating growth, following the severe contraction is seen earlier in the decade.
Market consensus indicates that this QE will be prolonged until December, but reduced to 15 billion euros a month in the last quarter of the year. David Zahn, the head of European fixed income at investment firm Franklin Templeton, told CNBC’s “Squawk Box Europe” Friday that the ECB had “spent 2.5 trillion (euros) to do QE, and they want to make sure they don’t exit too quickly and kinda end up wasting over 2 trillion euros.”
The ECB has been under renewed scrutiny over the last few weeks. Some analysts and officials have suggested that stronger economic data in the region requires a tighter attitude towards monetary policy. The new anti-establishment government in Italy has also voiced some criticisms of the central bank.
Members from the new government accused the ECB of market manipulation by buying more German bonds in May and less Italian debt. Experts told CNBC that there were technical reasons that justified such purchases last month.