Mission Accomplished for the ECB, for Now

The European Central Bank has said it intends to end its bond-buying program at the end of this year. It was the right decision. The aim of the program was to stave off the threat of deflation, and that has been done. Nonetheless, risks remain, and the central bank can’t afford to ignore them.

The euro-zone economy has come a long way since the ECB first launched QE in January 2015. Inflation has gone up from minus 0.6 percent to 1.9 percent — in line with the central bank’s target of close to but below 2 percent. Core inflation, which omits volatile items such as energy, is lower, but this too is changing. In the first quarter of the year, compensation per employee across the currency union rose at a yearly rate of 1.9 per cent, suggesting that inflationary pressures are growing.