Global equity markets are selling off this morning and bond yields are rising as news that the European Central Bank considered removing a pledge to increase their bond-buying program if needed. Money printing by the world’s largest central banks has gone on for so long that it is easy to forget the massive amount of support they are providing to global financial markets. A quicker than anticipated end to the ECB’s bond buying program could remove some of that support.
Bloomberg has the story.
European Central Bank policy makers considered removing a pledge to increase their bond-buying program if needed when they met last month.
As the likelihood of calls for unconventional policy measures to be stepped up had “clearly diminished,” the Governing Council discussed removing the easing biases in their policy communication, an account of the June 7-8 meeting showed. While they ultimately opted only to change the wording on interest rates, “it was argued that the improved economic environment with vanishing tail risks, in principle, suggested also revisiting the easing bias with respect to the asset-purchase program.”
The account highlighted how nervous decision-makers are about the outlook for the post-crisis recovery as they edge cautiously toward the day they start unwinding their extraordinary measures. Governors considered the combination of a downward revision to the inflation outlook and an upward revision to growth as “puzzling,” considering that a closing output gap should push wages and prices higher.
Read more here.
Jeremy Jones, CFA
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