Daily Times

The European Central Bank is set to draw a line under its massive bond-buying stimulus programme at a meeting in Amsterdam on Thursday, as inflation in the eurozone soars to all-time highs. The decision, already extensively flagged in advance by senior policymakers, is then expected to pave the way for the ECB to raise its interest rates for the first time in over a decade in the weeks that follow.

Eurozone consumer prices rose by 8.1pc year-on-year in May, a record since the single currency was launched and well above the ECB’s own target of 2pc. The surge, driven by the war in Ukraine and the consequent rise in energy prices, has boosted calls for the ECB to move more quickly to end its expansionary monetary policy. The ECB is lagging behind the central banks in Britain and the United States, which have moved aggressively to try to stamp out inflation.

But the ECB first plans to discontinue asset purchases under its crisis-era stimulus programme before proceeding to actual rate hikes. The so-called asset purchase programme, or APP, is the last in a series of debt-purchasing measures worth a total of around five trillion euros ($5.4 trillion) deployed by the ECB since 2014. ECB chief Christine Lagarde suggested recently that the APP would “end very early in the third quarter”. For ING’s head of macro, Carsten Brzeski, the comments by Lagarde, a former French finance minister, were “remarkable” in that she has taken the unusual step of mapping out a timetable for ECB policy into the second half of the year. Lagarde said that rates were set to “lift off” at the ECB’s meeting in July — the first upward move in borrowing costs in over a decade — and the euro’s guardian would then close the era of negative interest rates by the end of September.