The European Central Bank (ECB) is ending its bond-buying program earlier than anticipated as it prepares for a possible interest rate increase later in the year.
As The Wall Street Journal reported Thursday (March 10), the program will likely be phased out by September, with any interest rate hikes happening on a gradual basis “some time” after the program ends.
The Journal said the bank’s move marks a shift from its more relaxed monetary policy, showing rising concerns about inflation, which is around 6% in the EU region.
It’s even higher in the U.S., leading the Federal Reserve — and other central banks — to indicate a desire to start raising interest rates to combat this historic inflation.
Read more: Inflation Soars 7.9% to Another 40-Year High
Figures released by the U.S. Bureau of Labor Statistics Thursday (March 10) showed that rising prices for gas, food and shelter helped contribute to 40-year record high inflation, with the consumer price index — a major indicator of U.S. inflation — reaching 7.9%, compared to from 7.5% in January.
White House press secretary Jen Psaki had said Wednesday (March 9) that high inflation was anticipated, in part due to climbing energy prices since year began. Also to blame, Psaki said was Russian President Vladimir Putin’s military buildup and the subsequent invasion of Ukraine, both of which were “felt in the markets.”
As PYMNTS noted earlier in the week, the invasion, spiking energy cots and supply chain setbacks have put global financial conditions in their worst position in years.
Read more: Global Financial Condition Suffers Under High Energy Prices, Ukraine Conflict
Goldman Sachs’ widely used financial conditions index was at 100.2 earlier this week, 60 points tighter than before the Ukraine conflict began. The last time it reached this level was two years ago, when the pandemic shutdowns began.
In a statement issued Thursday (March 10), the ECB said purchases under the bond buying program would amount to $44 billion (40 billion euros) in April, $33.5 billion (30 billion euros) in May and $22 billion (20 billion euros) in June.
These purchases will wrap up in the third quarter, assuming “incoming data support the expectation that the medium-term inflation outlook will not weaken,” the central bank said.
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