The European Central Bank (ECB) announced on 8 December that it will scale back the amount of bonds that it buys each month from €80 billion to €60 billion, but insisted that it would be extending its landmark quantitative easing programme (QE) by nine months, until the end of 2017.
The ECB president, Mario Draghi says that the extension sends a message that the bank remains active on the markets “for a long time”, as “uncertainty prevails everywhere”. Draghi explains that the reduction in bonds is due to the fact that a “deflation risk has largely disappeared”. However, the bank argues that this monthly reduction will not reduce the eventual number of bonds purchased, after the bank has promised to buy assets for a longer period.
Despite this assertion, the decision was not made unanimously by members of the governing council. Neil Williams, group chief economist at Hermes Asset Management speculates “[t]he extra QE, even with tapering, easily surpasses the combined GDPs of Greece and Portugal”. However, Peter Chatwell at Mizuho says that by cutting monthly purchases, the ECB had announced roughly €100 billion less QE in 2017 than investors had been expecting.