Lower for longer, ECB scales back asset buys

Promise protracted stimulus to aid a still fragile recovery, and dismissed any talk of tapering the programme away

The European Central Bank (ECB) trimmed back its asset buys in a surprise move on Thursday but promised protracted stimulus to aid a still fragile recovery, and dismissed any talk of tapering the programme away.

With still no sign of a sustained rebound in underlying inflation and heightened political risk from looming elections in four of the euro zone's five biggest economies, the ECB promised to keep borrowing costs depressed longer than predicted, even reserving the right to raise back purchases if the outlook sours.

Although the cut in the volume of monthly assets buys suggests a concession to conservative countries such as Germany and the Netherlands, the underlying message was seen as dovish, catering to nations on the periphery and a boost for financial markets.

Catching financial markets off-guard, ECB President Mario Draghi said the bond buys would be cut to Euro 60 billion a month from Euro 80 billion starting April but they would go on until the end of 2017, three months longer than expected.

“There is no question about tapering,” Draghi said. “We can even go back to 80 (billion)... there's a range of options.”