02:26
The European Central Bank has outlined plans to end its massive stimulus program by the end of 2018. But it also indicated that a rate hike is unlikely to come before the summer of 2019. Mariam Zaidi has the details.
MARIAM ZAIDI BRUSSELS "The European Central Bank says it will continue to buy back debt on the market but reduce its asset purchases from 30 to 15 billion euros per month from September 2018. With the hope that at the year’s end they can stop their three Trillion Euros Quantitative Easing program all together – the special weapon introduced by ECB to fight the economic crisis."
Many had looked to this meeting of the ECB's governing Council in Riga, Latvia as the possible moment that Draghi would finally drop the axe on the controversial QE program. Instead he set out a slow but careful path towards normalisation and interest rates will also remain unchanged through to Summer 2019.
Draghi pointed to various factors. Despite Eurozone inflation being at 1.7 percent, sustained monetary policy stimulus was still needed till the end of the year as the outlook for real GDP growth had been revised down.
Growth for the second quarter of 2018 was 2.1 percent, down from 2.4% in March. And forecasts suggest it will further fall to 1.9 percent in 2019 and to 1.7 percent by 2020.
MARIO DRAGHI PRESIDENT, EUROPEAN CENTRAL BANK "Today's monetary policy decisions maintain the current ample degree of monetary accommodation that will ensure the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term. Significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term."
MARIAM ZAIDI BRUSSELS "But the ECB President also pointed to uncertainties. Rising protectionism and the fears of a trade war with the US could pose a risk to the Eurozone. But his main concern was political tensions in Italy under the new populist government. Italian PM Guiseppe Conte says an exit from the Euro is not up for discussion but how they handle reducing Italy's 2.3 Trillion Euros public debt and stimulating the economy remains to be seen. Mariam Zaidi, CGTN Brussels."