ECB to curb stimulus amid darker outlook

By BLOOMBERG

FRANKFURT • The European Central Bank (ECB) still intends to cap its bond-buying by yearend and leave room for an interest- rate increase late next year, even amid mounting signs that the euro-area economy is wilting under global pressures.

The Frankfurt-based institution said it will buy €15 billion (RM70.89 billion) of bonds a month through December, with a final decision to end the programme contingent on incoming information. Policymakers reiterated that interest rates will remain at their present record lows “at least through the summer” of 2019.

Attention now turns to President Mario Draghi as he will explain the Governing Council’s decision. The euro was barely moved by the statement, trading up 0.2% at US$1.1411 at 1:56pm local time yesterday.

A key point investors will focus on is the assessment of economic prospects. Since policymakers characterised risk to the outlook as “broadly balanced” six weeks ago, domestic momentum has weakened and uncertainty around global growth has increased.

A gauge for private-sector growth in the euro-area slowed to the weakest since 2016 — a level IHS Markit said on Wednesday “would historically be consistent with a bias toward loosening monetary policy”. Confidence in the region’s largest economy slid. Draghi’s list of concerns is long.

Underlying inflation continues to be muted, trade tensions between the US and China are starting to take their toll on the Asian economy and export-focused companies in Europe and around the world, and risks of a disorderly Brexit are running high.

Investors are also concerned on whether the ECB will change its reinvestment policy once net purchases end.