ECB ends net purchases, but sounds a rather dovish tone

As widely expected, the ECB decided today to end net purchases under its APP programme by the end of this year, while keeping its forward guidance for policy rates unchanged. At the same time , the forward guidance on reinvestments of bond holdings was “enhanced” and reinvestments will take place for an “extended period of time ” after the first policy rate hike. Finally, the new guidelines for reinvestments will keep the relative size of each programme unchanged. Reinvestments under the PSPP programme will follow the capital key. The adjustment to the new capital key will th ereby take place very gradually in order to “safeguard orderly market conditions” . Overall, neither the prepared statement nor Mr Draghi’s comments during the press conference gave away much in terms of next steps. Given the general uncertainty to the outlook , this is understandable. We continue to expect the forward guidance on rates to be adjusted in the upcoming meetings, signaling a rate hike only by the end of next year.