(MENAFN- AFP) The European Central Bank on Thursday surprised markets by announcing an extension of its massive bond-buying scheme to keep its unprecedented stimulus efforts going, but reducing its size to 60 billion ($65 billion) euros a month.
Given the euro area's sluggish recovery and stubbornly low inflation, investors and analysts had widely expected the bank to announce an extension of the asset-purchasing scheme but at the existing monthly rate of 80 billion euros.
The scheme, aimed at encouraging lending and investment, was scheduled to end in March.
"From April 2017, the net asset purchases are intended to continue at a monthly pace of 60 billion euros until the end of December 2017, or beyond, if necessary," the ECB said in a statement.
It added however that the bank could increase the purchases again if the economic outlook worsened.
"To be on the safe side, the ECB kept all its options open," said Berenberg analyst Holger Schmieding.
Economist Carsten Brzeski of ING-Diba bank said it remained to be seen whether the ECB's move was "a wise decision".
"Even without calling this tapering, the ECB just announced tapering," he said.
"It is the combination of extending and tapering that we thought would not yet happen as it could risk an unwarranted increase in bond yields."
Markets were spooked in October by a Bloomberg news report suggesting that the ECB was looking at winding down, or "tapering", its monthly asset purchases, triggering a bond sell-off that pushed up government borrowing costs.
The ECB's governing council also voted to keep its key interest rates unchanged at record lows at the last policy meeting of the year, a spokesman said.
Policymakers kept the benchmark "refi" refinancing rate at zero percent, the marginal lending facility at 0.25 percent and the deposit facility rate at minus 0.40 percent -- meaning banks have to pay to park their excess cash at the ECB.
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