ECB renews its pledge to end bond-buying

Bloomberg

The European Central Bank (ECB) renewed its pledge to end bond-buying in the coming months, as record inflation raises the odds it will also lift interest rates for the first time in more than a decade before the year is out.
The Governing Council reiterated that it will halt net asset purchases in the third quarter — an accelerated timeline agreed on last month with consumer prices now surging at almost four times the 2% target. It reaffirmed that “gradual” rate hikes will follow “sometime after.”
“Inflation has increased significantly and will remain high over the coming months, mainly because of the sharp rise in energy costs,” the ECB said in a statement. “The Governing Council will take whatever action is needed to fulfil the ECB’s mandate to pursue price stability and to contribute to safeguarding
financial stability.”
Money markets trimmed ECB tightening bets, pricing quarter-point rate hikes in September and December. German bonds rose, sending the 10-year yield one basis point lower to 0.75% after earlier climbing to 0.83%.
While still well behind the Federal Reserve and the Bank of England in raising borrowing costs, the faster timetable for withdrawing stimulus underlines the ECB’s focus on taming price pressures — stoked by the war in Ukraine — over risks to the pandemic rebound in the 19-member euro zone.
But with Russia’s invasion complicating the task of forecasting, policy makers will now await new projections in June before cementing an end-date for asset purchases. Economists predict the ECB will eventually select July as the cutoff and expect rate liftoff in December.
Some ECB officials back a similarly tough approach, though others fret that a steadier pace is needed as the conflict saps confidence and the prospect of a ban on Russian energy threatens recessions for economies such as Germany’s — Europe’s largest.