The

European Central Bank (ECB)

has made a move at its first meeting after the outbreak of the war in Ukraine and, faced with a runaway price rise on the continent, has announced a

tightening of its monetary policy

:

its debt purchases

will exceed 40,000 million in April to 30,000 million euros already in May and 20,000 million in the month of June.

This is a

much faster withdrawal of stimuli than expected

, since at the last meeting, held in December, the bank chaired by

Christine Lagarde

had said that it would continue to buy debt at a rate of

40,000 euros per month throughout the second quarter

, that is, until June, and that it would not drop to 30,000 million until the third quarter, nor to 20,000 million until the fourth.

The ECB has warned that

if this measure fails to moderate inflation, then it will put an end to asset purchases in the summer

.

"The calibration of net purchases for the third quarter will depend on the data and will reflect its anticipated assessment in the outlook. If incoming data supports the expectation that the medium-term inflation outlook will not weaken even after the end of our purchases net of assets, the Governing Council will conclude the net purchases under the APP in the third quarter.

If, on the other hand, the inflation outlook changes, then they say they are "

prepared to review the net purchase calendar in terms of size and duration."

"

The ECB cannot keep adding fuel to the fire of inflation

and the bond purchases were created to increase inflation, not decrease it. In fact, they were using a bond purchase program that was created when the Eurozone problem was the risk of deflation. Now logically

they have to change the chip completely since, in addition, European inflation is going to be anything but transitory

, at least in the medium term",

Víctor Alvargonzález

, founding partner of the financial advisory firm

Nextep Finance

, has assessed in statements to THE WORLD.

The market expert warns that this decision

will cause a fall in the price of the bonds

, because the "largest buyer of European bonds in the world", which in the case of Spain or Italy is practically "the only buyer",

"we will leave faster than expected.

In the statement issued after the meeting of its Governing Council, the ECB has maintained interest rates at current levels

-0.0%, 0.25% and 0.5%-

and has warned that "

any adjustment will have take place some time after net purchases end"

and that "it

will be gradual

".

This represents a

change of discourse

on the part of the Governing Council, which until now planned that the rate hikes would take place immediately after the end of the debt purchase.

Given that net purchases could end in the third quarter, this would be compatible with a

first interest rate hike in December

or as early as

2023

, as many market players expect.

In addition, it has reaffirmed that it

will do whatever it takes

to be able to fulfill its price stability mandate.

"The Governing Council will take the necessary measures to fulfill the ECB's mandate to seek price stability and safeguard financial stability," he stressed.

According to analysts at the consulting firm

Capital Economics

, "

the ECB has shown that it is more concerned about an even higher rise in inflation

than about the negative shock to demand that is going to be produced by the war in Ukraine. Far from delaying its tightening of monetary policy, the Bank has accelerated the end of the purchase of debt and could finish it completely in the third quarter. This could pave the way for rate hikes in the second half of this year".

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Know more

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