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LGT Navigator: ECB communicates faster end to bond purchases

September 14, 2018

As expected, the European Central Bank (ECB) left its key interest rates unchanged. However, central bank president Mario Draghi announced that the ECB will reduce the pace of its multi-billion bond purchases to EUR 15bn (instead of EUR 30bn) per month as early as October. The end of the purchasing program is still planned for December 2018 and a turn towards higher interest rates is not expected until autumn 2019 at the earliest.

The ECB's cautious bias toward an interest rate turnaround, despite the announcement to end its billion-dollar bond purchase program probably at the end of this year, weakened the euro significantly. The ECB maintained its key interest rate at a record low and remained extremely cautious in its communication. At the same time, the Bank of Japan also left its key interest rates unchanged and even lowered its inflation expectations.

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