Eurozone stimulus program to end after Dec

All Eyes are on Powell

All Eyes are on Powell

"Governments need the discipline of the free-functioning market as an incentive to focus on sound sustainable policies that promote growth in their economies and businesses".

The ECB announced it would end its unprecedented bond purchase scheme by the end of this year, but said it would maintain rates at record lows at least through the summer of 2019.

The bank's move towards the exit comes a day after the US Federal Reserve decided to make its second interest rate increase this year and indicated more were coming.

"We are in an altogether different world to only a couple of years ago", said Patrick O'Donnell, senior investments manager at Aberdeen Standard Investments.

"We have reservations about the strength of the eurozone economy, so retain no direct exposure to European bonds and keep our client portfolios under-exposed to the adverse effects of rising bond yields globally". Higher rates can stave off inflation, but they can also hinder economic growth.

The Stoxx Europe 600 edged up 0.2% shortly after markets opened, following its biggest daily gain since April as investors reacted positively to news that a eurozone rate increase remained a distant prospect.

In a statement, the bank said: "The governing council will continue to make net purchases under the asset purchase programme at the current monthly pace of €30bn until the end of September 2018". The figure then falls to zero in December 2018.

"With the statement that key interest rates will remain at historically low levels until the summer of 2019, the European Central Bank has removed any fantasy of an earlier rate hike".

Other analysts said they thought that now the ECB's closely-watched meeting was out of the way and the picture for interest rates clearer, currency markets could embrace more risk.

The euro had initially risen during the meeting, after the European Central Bank said it would phase out its financial crisis-era stimulus programme for the 19-country region by the year-end.

ECB president Mario Draghi declined to give more detail about the timing of rate moves in a news conference after the policy meeting held in the Latvian capital Riga, not the bank's Frankfurt headquarters.

Unemployment soared to 10 percent in 2009 and some 8.5 million jobs were lost during the recession that set off a global downturn and financial crisis. That provided extra support for the notes, which have been boosted by more euro-friendly rhetoric from officials in Italy's newly formed government. A coalition between the anti-establishment 5-Star Movement and the anti-immigration League has promised spending that could add to the country's already heavy debt load. At various times the parties have also questioned Italy's membership in the euro itself. Inflation was 1.9 percent in May, but the bank needs to be sure the higher rate will persist.

He also said that the economic projections do not contain the impact of trade measures that have not been implemented yet and their direct consequences have been limited so far. The Dow and Germany's DAX both touched record highs earlier this year.

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