ECB surprises, speeds up QE exit

The European Central Bank surprised financial markets, announcing a quicker wind down of its asset purchases, even as it described the Russian invasion of Ukraine as a watershed for Europe.

In what appeared to be a shift towards a greater concern around the inflation outlook, the ECB pledged "to do whatever it took to fullill the monetary authority's mandate for price stability and in order to safeguard financial stability."

Now, buying under its Asset Purchase Programme was set to slow from €40bn in April, to €30bn in May and €20bn in June and those in the third quarter would be "data-dependent" and possibly stopped.

A halt in the APP would depend on the medium-term inflation outlook, the ECB said.

APP purchases had previously been set to run at a pace of €40bn over the three months to June, at a clip of €30bn in the third quarter and at €20bn per quarter "for as long as necessary" thereafter.

As expected, all of the main interest rates were unchanged with those on the main refinancing operations, the marginal lending facility and the deposit facility kept at 0.0%, 0.25%, -0.50%, respectively.

Similarly, the ECB stuck to its plan to halt its Pandemic Emergency Purchase Programme in March.

European Central Bank chief, Christine Lagarde, was scheduled to hold her regular post-meeting press conference at 1330 GMT.

"A bit more hawkish than expected...though how buying even more bonds, further expanding the balance sheet and heaping more fuel on the inflation fire until June at the earliest can be considered ‘hawkish’ in any way is kind of ridiculous," said Neil Wilson, chief market analyst at Markets.com.

"But that is where we are right now, trying to wean the addict off the junk with methadone. Now over to Lagarde to see what kind of hole she digs at the presser [...] "