European Central Bank says euro 'irreversible'

European Central Bank says euro 'irreversible'

European Central Bank says euro 'irreversible'

But it cautioned that the plan was "subject to incoming data".

The ECB said its Governing Council will continue to make net purchases under the asset purchase programme (APP) at the current monthly pace of Euro 30 billion until the end of September 2018.

"We chose to keep the key European Central Bank interest rates unchanged and we expect them to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with our current expectations of a sustained adjustment path", Draghi said.

The ECB's statement reflected the battle between hawks and doves on the bank's council, with the decision on QE matched by a softening of its approach to interest rates.

Officials of the Frankfurt-based European Central Bank, it seems, are betting that the euro-area economy will be resilient in the face of the threat posed by United States trade tariffs and growing anxiety over the possibility that Italian Prime Minister Giuseppe Conte's populist government will trigger another financial crisis.

Bond purchases are now running at a maximum of €30 billion (R470 billion) per month, but will be lowered to €15 billion (R235 billion) per month from September, before being completely stopped at the end of December.

The size of the stimulus was enormous: At €2.7 trillion, it rivals the entire value of the French economy previous year.

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Commenting on the outlook for inflation, ECP president Mario Draghi, said: "The euro area annual HICP inflation increased to 1.9% in May 2018, from 1.2% in April". But he's aware of the risks, and the bank downgraded its forecast for eurozone growth in 2018 to 2.1% from 2.4%. Nevertheless, uncertainties related to global factors, including the threat of increased protectionism, have become more prominent.

The decision represents a belief in the central bank that the eurozone economy, after years of weakness and recession, "is now sufficiently robust that it can start to withdraw monetary stimulus" says The Independent.

This may really give us a picture of how the Federal Reserve is the central banker to the world.

The Fed ended its program in 2014 and has now raised interest rates seven times since 2015.

The Federal Reserve clearly stated on Wednesday that it meant to produce two more increases in its policy rate this year, and, this would be followed up by three more increases in 2019.

The ECB on the other hand is likely to be far more cautious in its approach to tightening monetary policy.

Italy's Finance Minister Giovanni Tria made assurances at the weekend that the country would stay committed to the euro, while the euroskeptic minister for European Affairs Paolo Savona - whose planned appointment to Tria's position roiled markets - said the common currency was indispensable.

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