ECB Announced a Faster End to its Asset Purchases Program

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ECB Decision

The European Central bank announced today a faster tapering path of its Asset Purchases Program (APP) and an earlier conclusion than previously communicated.

In particular, the central bank announced that monthly net purchases under the APP will amount to €40 billion in April, €30 billion in May and €20 billion in June and the Governing Council will conclude the APP in the third quarter, if this is supported from the incoming data. [1]

This surprised many market participants, as it constituted a hawkish shift from February's plan for monthly net purchases that would amount to €40 billion in the second quarter of 2022 and €30 billion in the third quarter. [2]

However, Ms Lagarde downplayed this change during her press conference, stressing that today's decision was not an acceleration of the normalization process and unequivocally stating that "We are not in any way accelerating". [3]

Any increase in the interest rates will take place "some time after the end" of the asset purchases and will be "gradual". We believe that this opens the door to a rate hike within this year, a scenario that Ms Lagarde had been rejecting until recently, but last month refused to rule out [4].

Trade the News: View our Economic Calendar

The central bank also released the updated staff macroeconomic projections which upgraded Inflation and downgraded economic growth for 2022. Inflation is now set to average 5.1% this year and GDP 3.7%, from 3.2% and 4.2% respectively, in the December projections. [5]

EUR/USD reacted higher on the news around the APP but erased gains and at the time of writing, trades in negative territory.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 10 Mar 2022 https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.mp220310~2d19f8ba60.en.html

2

Retrieved 10 Mar 2022 https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.mp220203~90fbe94662.en.html

3

Retrieved 10 Mar 2022 https://www.youtube.com/watch

4

Retrieved 10 Mar 2022 https://www.ecb.europa.eu/press/pressconf/2022/html/ecb.is220203~ca7001dec0.en.html

5

Retrieved 01 Jul 2022 https://www.ecb.europa.eu/pub/projections/html/ecb.projections202203_ecbstaff~44f998dfd7.en.html

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