The ECB Suggests an Early 2019 End to Quantitative Easing. Could Negative Rates End Sooner?

The decision. The European Central Bank (ECB) left policy rates unchanged at its October policy meeting. The repo rate stayed at 0%, the deposit rate at -0.40%. As expected, the bank announced a reduction in its monthly asset purchase program from €60 billion a month to €30 billion starting in January. The program was extended to run “until the end of September 2018, or beyond, if necessary.” The ECB maintained its forward guidance, stating it continues “to expect [policy rates] to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases.” It intends to “continue to reinvest the principal payments from maturing securities purchased under the APP [asset purchase program],” which will continue “for an extended period of time after the end of its net asset purchases.”

Real policy rates. Eurozone real policy rates remain at -1.5%, using the repo rate as reference. That is still somewhat below the advanced world average, which has fallen to -1.12% from -0.9% two months ago. 

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