ECB Dec meeting: « Step-by-Step » reduction of purchases

The ECB made several changes to its policy stance at the December meeting. As widely expected, the pandemic purchase program PEPP will end in March. At the same time, purchases under the regular APP program will be increased to € 40 billion during the second quarter, reduced to €30 billion during Q3 and €20 billion from October onwards. Some flexibility was added to purchases via reinvestments of the PEPP , which may be undertaken to directly address an y signs of “market fragmentation” . Finally, the updated staff projections show inflation to be again below 2% in 2023 and 2024, in line with the ECB’s intention of a very gradual exit.