On Thursday 8 December, the Governing Council of the ECB will make a decision on what to do next with quantitative easing (QE), the operation consisting of buying back €80 billion in mainly public securities every month, that is currently scheduled to run until March 2017.
There was no discussion on the possibility of extending the QE operation or the idea of tapering off the pace of the purchases, the ECB president, Mario Draghi, said on Thursday 20 October. However, he said that it was "unlikely" that QE would be broken off abruptly. The economic analysis highlights the need to keep in place the very substantial monetary support provided by the ECB to support economic recovery, he noted in his preliminary comments. He added that the "decision in December will tell you what we'll do in the coming months".
At its previous monetary policy decision-making meeting, the Governing Council asked its services to reassess the monetary instruments in place and to provide options on future developments in the current policy (see EUROPE 11619). We have options at the moment, but we did not do a headcount to see who supports each option, Draghi said, adding that the Governing Council was the only body of the ECB authorised to make monetary decisions.
The former president of the Bank of Italy did, however, acknowledge that sooner or later, the ECB would have to take account of the shortage of some bonds on certain markets, in reference to the monetary institute's increasing difficulties in getting hold of certain securities, particularly German ones. As of Friday 14 October, the European institution had acquired nearly €1.1 billion of public bonds, including more than 255 billion German bonds and 202 billion French ones.
In December, the monetary institute will also have in its hand the latest economic and inflation forecasts. At economic level, the ECB on Thursday noted slight but steady economic recovery in the eurozone, whilst flagging up a predominance of downwards risks, such as slowing external demand and the excessive time the structural reforms in the member states are taking. It approves of the extension of the Juncker investment plan, and called for the Capital Markets Union to be set in place quickly and a swift clarification of the treatment of non-performing loans.
Inflation stood at 0.4% in the eurozone in September, up from 0.2% in August. It is expected to rise slowly and steadily in 2017. The ECB has once again stressed that it is prepared to act if necessary to respect its medium-term mandate of maintaining annual price increases at a level close to but below 2%.
In addition, the ECB on Thursday kept the interest rates on principle refinancing operations (0.00%), the marginal loan facility (0.25%) and the deposit facility (-0.40%) unchanged. These rates will remain low for an extended period that will continue for a long time after the QE operation has finished. (Original version in French by Mathieu Bion)