ECB extends QE programme

Synopsis

The major talking point from today's ECB meeting is the decision to cut asset purchases by half, reducing them from sixty billion a month to thirty billion a month. This extension of quantitative easing lasts for another nine months, amounting to an additional 270 billion in assets being purchased. ECB President Mario Draghi refers to this as a downsize rather than an explicit tapering. The meeting also clarifies that interest rates will remain at current levels well beyond the horizon of these net asset purchases. Following the meeting, the German 10-year bond yield decreases by five basis points, while Spanish and Italian yields drop by ten basis points. The euro falls by half a percentage point, and European stocks see an uptick. Additionally, the ECB commits to reinvesting the proceeds from maturing bonds, which analysts at UBS estimate could lead to another 100 billion in effective purchases next year and 180 billion in 2019, providing a silent additional contribution to the market.