When Will the ECB Pull Its Trillions From the Markets?

By Jana RandowJana Randow, Jeremy Scott DiamondJeremy Scott Diamond and Hayley WarrenHayley Warren
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After three years of asset purchases, negative interest rates and cheap loans, the European Central Bank is finally confident that it has beaten the risk of deflation in the euro area. Now it’s time to start thinking about how to unwind those extraordinary measures.

It won’t be simple. The ECB’s mandate is to keep inflation just below 2 percent, but to judge its progress it looks at a range of key economic and market indicators.

In the first step toward the exit, policy makers decided to reduce monthly asset purchases by half starting in January and extend the program for at least another nine months. Click through the timeline to see how key indicators have weighed on the central bank.

  • Q4 2020

    Policy makers seen reinvesting proceeds from maturing debt until until at least the end of 2020

  • Q2 2020

    Second round of targeted long-term loans start to expire

  • Q3 2019

    Policy makers seen raising main refinancing rate to 0.25 percent from its record low of zero

  • Q2 2019

    Policy makers seen raising deposit rate by 20 basis points from its record low of minus 0.4 percent

  • Q4 2018

    Economists see ECB tapering buying to zero

  • Q3 2018

    Economists predict policy makers will announce by July when QE will end, and change their guidance on interest rates by September, when asset purchases are current scheduled to expire

  • Q1 2018

    ECB reduces the monthly pace of its asset purchases by half, to 30 billion euros, starting in January and stresses the importance of its reinvestments. In March, it unexpectedly drops its so-called easing bias, a pledge to increase the monthly pace of bond purchases if the inflation outlook worsens.

  • Oct. 2017

    ECB decides to reduce monthly pace of asset purchases by half to 30 billion euros from January and to extend the program until at least September 2018. Policy makers also pledge to continue reinvesting proceeds from maturing debt for an extended period of time after the end of net asset purchases.

  • Sep. 2017

    Draghi says “bulk of the decision” about future policy path will come in October as ECB updates economic forecast

  • June 2017

    ECB adapts policy language to pave way for gradual unwinding of stimulus

  • April 2017

    Reduction of monthly QE purchases sparks exit debate

  • March 2016

    ECB announces “comprehensive package” of rate cuts, increased monthly bond purchases, addition of corporate bonds to QE, new targeted long-term loans, and reiterates forward guidance on borrowing costs

  • March 2015

    Quantitative easing commences
  • Jan. 2015

    ECB announces large-scale government-bond purchases after inflation rate fell below zero for first time since the financial crisis

  • Sep. 2014

    ECB announces ABS and covered-bond purchases plan, and Draghi pledges to stir balance sheet toward 2012 dimensions, making a bigger sovereign-bond buying program inevitable

  • June 2014

    ECB becomes first major central bank to cut interest rates below zero, and banks are offered targeted long-term loans to boost credit

  • April 2014

    Draghi presents ECB policy tools and lays ground for QE
  • July 2013

    Draghi introduces forward guidance on interest rates

  • Sep. 2012

    ECB presents OMT government-bond purchase plan, terminates SMP program. The balance sheet shrinks

  • July 2012

    Draghi vows to do “whatever it takes” to safeguard the euro after bond spreads surge