ECB begins cautious taper while holding rates

PEPP will end by March 2022

The European Central Bank has begun withdrawing its €70bn Pandemic Emergency Purchase Programme (PEPP), reducing it in the first quarter of next year and ending it by March 2022.

While the central bank will begin tapering, much of the impact will be offset by doubling the Asset Purchase Programme (APP) to €40bn in Q2 next year, due to increasing uncertainty around the omicron variant. This will be reduced to €30bn in Q3 and return to the current €20bn in Q4. Furthermore, the reinvestments from PEPP will continue until at least the end of 2024 and could be restarted at any time if deemed necessary. Carsten Brzeski, chief economist for ING Germany, said on Twitter that while the decisions today were rather dovish, "inflation projections and risk assessment are r...