ECB announces end of bond buys, sees rates stable until summer 2019

RIGA (Reuters) - The European Central Bank decided on Thursday to end its 2.55 trillion euro (2.3 trillion pounds) bond-purchase programme at the close of the year and said interest rates would stay unchanged until the summer of 2019.

Between October and December, the ECB plans to buys 15 billion euros (13.2 billion pounds) worth of bonds per month and then close the scheme at the end of the year.

“The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path,” the ECB said in a statement.

This is in line with investors’ expectations.

The ECB has already spent well over than 2 trillion euros buying bonds since 2015 and has kept its deposit rate below zero, effectively charging banks for their idle cash, for four years in a bid to revive inflation.

Its chief economist, Peter Praet, said last week economic data was making the ECB more confident that inflation would converge to its target of just under 2 percent and policymakers would decide this week whether progress was sufficient.

Attention now turns to ECB President Mario Draghi’s 1230 GMT news conference, in which he is likely to provide further hints on the bank’s policy shift and unveil fresh economic forecasts.

With Thursday’s decision, the ECB’s rate on bank overnight deposits, which is currently its primary interest rate tool, remains at -0.40 percent. This is seen rising by 10 basis points in mid-2019.

The main refinancing rate, which determines the cost of credit in the economy, remained unchanged at 0.00 percent while the rate on the marginal lending facility -- the emergency overnight borrowing rate for banks -- remains at 0.25 percent.

Reporting by Francesco Canepa and Balazs Koranyi; Editing by Catherine Evans