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Market players highlighted October as a turning point for the European Central Bank. They have expected nothing less than details on how the central bank will start reducing its monetary stimulus in the euro zone. In particular, money managers want to know by how much the ECB will reduce its monthly purchases of government bonds and when it will start doing so.
Announcing an exit from monetary stimulus is difficult for the central bank, as inflation remains below its target of “close but below 2 percent.” There’s also internal differences within the bank.
Some members believe that it is still too early to relax the stimulus program, but others are of the opinion that rates have been low for a very long time. Jens Weidmann, governor of the German central bank and one of the most hawkish members of the ECB, said in Washington: “I don’t see the need to continue pressing on the gas pedal of monetary policy and we are doing just this if we continue to make further purchases every month.”
The central bank has remained ultra-accommodative in the years since the global financial crash and the euro zone sovereign debt crises. As well as record low interest rates it also introduced U.S.-style quantitative easing (QE) — buying assets to stimulate lending — which is used to stoke inflation and boost the economy.
