This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.bbc.co.uk/news/business-38252116

The article has changed 4 times. There is an RSS feed of changes available.

Version 1 Version 2
ECB extends bond-buying scheme until December 2017 ECB extends bond-buying scheme but at slower pace
(about 1 hour later)
The European Central Bank has said it will extend its bond-buying programme until at least December 2017, as it kept interest rates unchanged at zero. The European Central Bank has said it will extend its bond-buying programme until at least December 2017, but cut its purchases by €20bn a month.
The €80bn-a-month quantitative easing scheme had been due to end in March, although the bank had been expected to extend it for at least six months.The €80bn-a-month quantitative easing scheme had been due to end in March, although the bank had been expected to extend it for at least six months.
However, the ECB will cut bond purchases to €60bn a month from April. In a move that surprised markets, the ECB said it would only buy bonds worth €60bn a month from April.
The euro rose against the dollar and the yen in response, but remained flat against sterling. The bank also kept its key interest rate unchanged at zero as expected.
The bank said that if the economic outlook "becomes less favourable", it would expand the size or length of its bond-buying programme. After rising initially, the euro fell sharply against all major currencies including the US dollar.
Carsten Brzeski at ING-DiBa said: "Even without calling this tapering, the ECB just announced tapering." The ECB said that if the economic outlook "becomes less favourable", it would expand the size or length of its bond-buying programme.
Kathleen Brooks of City Index said the move could be "the biggest central bank shock of the year", given that the Federal Reserve's expected decision to raise rates next week was fully priced in by the market. Mario Draghi, the bank's president, told a press conference in Frankfurt that "tapering has not been discussed".
"The extension to QE is much longer than we expected, but the tapering announcement is almost hawkish, a mere three days after the Italians voted No in its referendum," she said. Chris Williamson, chief business economist at IHS Markit, described the QE move as a reasonable compromise.
The ECB also confirmed it would make some changes to the rules governing its bond purchases that will be outlined at a press conference at 13:30 GMT. "The stimulus will provide a further boost the region's recovery in the face of elevated levels of political uncertainty, but also recognises the encouraging recent economic data flow and the growing constraint on the amount of assets eligible for purchase."
Neil Williams, chief economist at Hermes Investment Management, said the changes meant that the ECB's "liquidity sink is still filling up".
"By tapering its monthly asset purchases from €80bn down to €60bn, [Draghi] is still looking to inject an extra €540bn in QE. To put this into perspective, this easily surpasses in equivalent terms, the combined GDPs of Greece and Portugal for example."
However, Kathleen Brooks of City Index said the cut was "almost hawkish, a mere three days after the Italians voted No in its referendum".
Although the risk of deflation in the eurozone had largely disappeared, Mr Draghi said that "uncertainty prevails".
New rules
The bank raised its forecasts slightly for next year and now expects inflation of 1.3% - still some distance below its 2% target - and growth of 1.7%.
Inflation is expected to be 1.6% in 2018 and 1.7% the following year, with growth steady at 1.6% for both years.
The ECB also confirmed it would make some changes to the rules governing its bond purchases.
Alterations are needed to ensure the ECB does not run out of German bonds to buy - the country where its purchasing has been focused.Alterations are needed to ensure the ECB does not run out of German bonds to buy - the country where its purchasing has been focused.
Calculations by Cantor Fitzgerald this week showed that without changes, the ECB would run out of Irish bonds to buy in January.Calculations by Cantor Fitzgerald this week showed that without changes, the ECB would run out of Irish bonds to buy in January.
The bank also left at zero its refinancing rate, at which it lends money to commercial banks, and minus 0.4 percent on deposits it takes from banks. That negative rate aims to encourage banks to lend money rather than hoard it at the ECB. The bank also left at zero its refinancing rate, at which it lends money to commercial banks, and -0.4% on deposits it takes from banks. That negative rate aims to encourage banks to lend money rather than hoard it at the ECB.
The decision to extend the QE scheme helped shares in Italian banks continue to rise, with the sector on track for its best week since at least 2009.The decision to extend the QE scheme helped shares in Italian banks continue to rise, with the sector on track for its best week since at least 2009.