Investing.com - The European Central Bank said Thursday that it would reduce the size of its asset purchases from next year but will extend its asset purchase program for an additional nine months beyond its scheduled end in March 2017.
The ECB said it will maintain the size of its monthly quantitative easing program at €80 billion until its scheduled end in March 2017, but will reduce it to €60 billion as of April.
The asset purchases will continue at a pace of €60 billion per month until the end of December 2017, or beyond, if necessary, the ECB said.
The bank also changed the parameters of its bond purchasing program, removing the deposit limit floor, to address concerns that it may run out of bonds to buy.
Under the new rules governing asset purchases the ECB will be able to purchase government bonds which are yielding less than its deposit rate, which is currently at -0.4%.
That would enable the ECB to begin buying ultra-safe government bonds, such as German short-term debt.
The ECB left its interest rates unchanged earlier Thursday.
ECB Governor Mario Draghi said that cutting QE to €60 billion a month is not ‘tapering’ and added that tapering was not discussed at today’s meeting.
Draghi said the decisions were taken to ensure the ECB has a “sustained presence in the market”.
The ECB also updated its economic forecasts and said it now expects slightly faster growth and higher inflation in 2017.
Draghi also urged European leaders governments to “intensify” their efforts to create more growth-friendly fiscal policies and called for the “swift and effective implementations of structural reforms” to underpin the recovery.