ECB to end QE in December, but keep rates at record lows - as it happened

European Central Bank has voted to stop its huge bond-buying programme, but interest rates will remain at record lows for a long time

• ECB president Mario Draghi: We're stopping QE
• ECB has bought more than a2 trillion of government bonds
• ECB to end QE bond purchases in December
• Euro interest rates on hold until summer 2019
• Markets surge, euro slides
• Draghi warns against trade wars

5.26pm BST

The European Central Bank has shrugged off evidence of a slowdown in the eurozone and announced that it will phase out the stimulus provided by its massive three-year bond-buying programme to the eurozone economy by the end of the year, our economics editor Larry Elliott writes.

Draghi: We anticipate that, after September 2018, subject to incoming data confirming our medium-term inflation outlook, we will reduce the monthly pace of the net asset purchases to a15 billion until the end of December 2018 and then end net purchases

Draghi: The discussion on keeping interest rates at their present levels through summer 2019 does not imply that the savers are being denied of their income and interest because savers can invest in other assets and they have done so

Related: ECB calls halt to quantitative easing, despite 'soft' euro

5.13pm BST

Europe's stock markets have surged today, as traders take the ECB's decision to end QE in their stride.

In London the FTSE 100 has jumped 62 points to 7765, a gain of 0.8%. There are headier gains across Europe, as the sliding euro boosts exporters.

European stocks have soared as it appears the European Central Bank (ECB) won't be hiking interest rates until at least the back end of 2019. Mario Draghi, the ECB chief, confirmed the stimulus package would be wound down in 2018, and we could see a taper of the bond buying scheme in the final quarter of this year.

The update was far more dovish than some traders were expecting, and the euro sold off heavily on the back of it. The slide in the single currency prompted buying of eurozone equities.

4.42pm BST

Mike Ingram, chief market strategist at WHIreland, agrees that Mario Draghi was more dovish than expected today.

The pledge not to raise interest rates for at least a year has caught traders unawares. It has trumped the decision to end the bond-buying stimulus programme in December - which is why the euro has fallen, not risen, today.

The ECB has (conditionally) pre-committed to keeping interest rates at their current, extraordinarily low levels until at least the summer of 2019 and in any event 'as long as necessary'.

This sort of language was not expected from the ECB until the end of the 2018 and was the most biggest dovish surprise for markets. Up until this point, markets had been expecting about a 40% change on an ECB rate hike in a year's time.

4.40pm BST

Elsewhere in the markets, some extremely strong US retail spending figures have cheered investors.

US retail sales jumped by 0.8% in May, new data shows, and were up 5.9% over the past 12 months.

Dovish ECB guidance + strong US retail sales = EURUSD slammed 1% pic.twitter.com/VJ1sz6U6GQ

Atlanta Fed raises its Q2 GDP tracker to 4.8% from 4.6%

4.32pm BST

It's official: Greece has just unlocked the next a1bn of its bailout programme, having satisfied its lenders that its meeting its targets.

#Greece continues to deliver on commitments.
Another milestone completed in arrears clearance allows the @ESM_Press to disburse the pending a1bn. Today's ESM board decision is a good omen for the discussions on program exit in next week's #Eurogroup pic.twitter.com/YLdU5Jvq2g

3.46pm BST

Over in Athens MPs have just approved the last multi-bill of reforms the country will have to take before its bailout expires this summer.

It means fresh austerity and economic reforms for Greece, as our correspondent Helena Smith reports.

Final results saw 154 deputies vote in favour of the draft bill - which foresees more pension cuts, labour market regulations, health care measures and sell-offs in the energy sector - and 144 against.

The ballot took place in an atmosphere of growing political drama in Athens following the decision of the main opposition conservative party to call a vote of no-confidence in prime minister Alexis Tsipras' government over its handling of the Macedonia name row, and an accord unveiled earlier this week, that will see the Slavic state being renamed the Republic of North Macedonia.

3.37pm BST

Here's Danielle Haralambous, UK Analyst at the Economist Intelligence Unit, on the ECB's announcement and press conference:

"Mr Draghi acknowledged that risks from an increase in protectionism and financial market volatility had become more prominent, but maintained a relatively positive view of the outlook, brushing off signs of softer economic growth in the euro zone that prompted quite a sizeable a downward revision to the ECB's forecast for 2018, to 2.1% from 2.4% previously. However higher oil prices and rising domestic cost pressures meant that the bank's forecasts for inflation went up to 1.7% in both 2018 and 2019, from 1.4% previously.

Against this backdrop the ECB felt ready to announce moves towards a less accommodative policy stance, albeit not an overtly hawkish one. Principal payments from maturing securities under the asset purchase programme will continue to be reinvested, and the forward guidance on interest rates demonstrates that the bank is planning to keep policy loose for some time. Mr Draghi added that the ECB stands ready to adjust all of its instruments if necessary.

3.07pm BST

Jan von Gerich, chief strategist at Nordea Markets, predicts that the ECB won't raise interest rates until the end of next year:

The end of net purchases does not mark the end of very loose policy. In fact, Draghi sounded dovish today, and we still expect the first rate hike only in December 2019. Nevertheless, the peak in the balance sheet is close. https://t.co/Y2sYqoqbM7 pic.twitter.com/hma5gMcMGc

3.05pm BST

Candice Bangsund, vice president and portfolio manager at Fiera Capital, says today's meeting had something for hawks and doves.

"Despite political turmoil in the Eurozone's periphery and a recent soft patch of economic results, the ECB has set the stage for an end of QE later this year. Indeed, for the hawks, the ECB announced that it will taper the pace of monthly asset purchases after September (from a30bn/month to a15bn/month) and then end the purchase program in December.

"However, for the doves - the ECB tempered this stance somewhat by reiterating its pledge that interest rates will remain unchanged until the back-half of 2019 ("at least through the summer of 2019") - which is slightly longer than markets were expecting."

2.39pm BST

And finally, Draghi denies that the ECB plotted against the new Italian government by stopping buying its bonds last month.

There's not conspiracy here, he insists.

Draghi on the 5 Star/League theory that the ECB caused the market turmoil in Italy in May: "No conspiracy here" (said with a wry smile)

2.37pm BST

Q: What impact will the US tariffs, and worries about a trade war, have on the Eurozone?

Draghi says that the ECB's latest economic forecasts do not include the effects of trade measures that have not been implemented yet.

2.26pm BST

Mario Draghi is declining to give more details about when eurozone interest rates might rise from their record lows.

It all depends when we achieve the necessary convergence, he says, adding tersely:

"If 'through the summer' meant September [2019], we would have said September"

2.22pm BST

Q: When might savers in the eurozone get some help from the ECB with an interest rate rise?

Draghi hits back, saying that savers benefit from the eurozone recovery - which more than makes up from the impact of low interest rates. The balance is vastly positive, he insists.

2.16pm BST

Draghi famously declared in 2012 that he would do 'whatever it takes' to save the euro.

He hasn't lost that belief today, as he tells reporters that the euro is 'irreversible'. He points out that 340 million people live in the eurozone, and more countries want to join.

2.14pm BST

Mario Draghi plays down the prospect that Italy creates a new eurozone crisis.

He says there was little "contagion" from Italy, and little "redenomination risk" (ie, that Italy leaves the euro and returns to the lira)

We have 19 countries, we are bound to have 19 elections every now and then.

Eventually #Draghi sends some heartfelt advice to Italian politicians to be careful with what they say and do, without mentioning #Italy of course.

#ECB's Draghi says important that govt discussions, language don't destroy progress

2.07pm BST

A reporter (rightly) ignores the warning not to ask about the allegations that Latvia's central bank chief Ilmars Rimsevics has sought bribes.

Draghi refuses to comment about the case, but insists the ECB is not taking any sides.

2.04pm BST

Our mantra is to be patient, prudent, and persistent, declares Draghi.

He reveals that today's decisions were unanimous.

2.01pm BST

The euro is falling more sharply as traders listen to Mario Draghi explain today's decision.

It's now down a whole cent against the US dollar, at $1.169.

Euro not liking what a@ecba(C)'s mario #draghi has to say today pic.twitter.com/y8WCssS8yp

1.57pm BST

Q: Why does the ECB think risks are broadly balanced? Where do you see upside risks?

Draghi says there is undeniably an increased risk in global political uncertainty [a downside risk].

Draghi talking about upside risks from fiscal expansion in the Eurozone... hmm from Italy perchance?! @senoj_erialc

1.52pm BST

Onto questions (after a warning to reporters not to mention the corruption allegations against Latvia's central bank governor - who isn't allowed into today's press conference).

Q: Do you expect to raise interest rates before you leave the ECB in October 2019?

Draghi says "We didn't discuss when to raise rates." Reiterates the statement language that they expect to keep rates unchanged until summer 2019. @ecb

1.49pm BST

Draghi ends his statement by calling on eurozone politicians to up their game.

Draghi says the implementation of structural reforms in euro area countries needs to be "substantially stepped up" to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential.

This is particularly important in countries where government debt remains high.

1.45pm BST

The ECB has also hiked its forecast for inflation this year and in 2019.

It now expects the price of living to rise by 1.7% per year, up from 1.4% previously. That's due to the higher oil price.

#ECB SEES 2018 INFLATION AT 1.7% VS. 1.4% - BBG
*ECB SEES 2019 INFLATION AT 1.7% VS. 1.4%
*ECB SEES 2020 INFLATION AT 1.7% VS. 1.7%
*DRAGHI: INFLATION OUTLOOK REVISED MAINLY DUE TO OIL PRICES

1.44pm BST

Boom! The ECB has cut its forecast for growth this year.

It now expects eurozone GDP to increase by 2.1% this year, down from 2.4% back in March.

Draghi: June 2018 Eurosystem staff macroeconomic projections for the euro area foresee annual real GDP increasing by 2.1% in 2018, 1.9% in 2019 and 1.7% in 2020

*DRAGHI: CITES TRADE, PROTECTIONISM AS RISKS

1.40pm BST

Growth in the eurozone economy is solid, and broad-based, Mario Draghi says.

But growth had moderated due to temporary factors, he adds, such as weaker trade with the rest of the world.

#ECB #Draghi: Btw... monetary policy stimulus is still needed pic.twitter.com/ozi6kcdGsm

1.40pm BST

ECB is ending QE at the end of the year, but President Draghi suggests at a news conference that the bank could ramp up stimulus if needed. Still willing to do whatever it takes, apparently.

1.37pm BST

We stand ready to adjust all our instruments as appropriate to ensure that we meet our inflation goals, Draghi continues.

That's a reminder that today's decisions aren't set in stone - the ECB can change policy whenever it deems it appropriate.

1.36pm BST

Mario Draghi begins by saying that the governing council undertook a careful assessment of the progress of its asset-purchase scheme, and of the inflation situation.

The governing council concluded that there has been "substantial" progress towards a sustained adjustment of inflation towards the ECB's target (of just below 2%).

Today's monetary policy decisions maintain the current ample degree of monetary accommodation that will ensure the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term.

1.31pm BST

ECB president Mario Draghi has arrived at his press conference in Riga, to explain today's decisions.

Watch ECB press conference live: President Mario Draghi explains today's monetary policy decisions https://t.co/BGX2M9vcjj

1.24pm BST

Some history: The ECB launched its QE programme back in early 2015, as policymakers tried to fight off the threat of deflation and persistently weak growth.

It began by buying a60bn of eurozone bonds each month -- despite opposition from some countries, such as Germany, who worried that the ECB could be monetising eurozone debt.

UBS say they've done a new model of the Euro area, and it says QE has saved the EZ. pic.twitter.com/E8ac20TBK4

1.10pm BST

Here's Marchel Alexandrovich, senior European economist at Jefferies, on the ECB's decision:

"The ECB takes the plunge and announces a three months taper to finish QE at the end of December (a15bn per month in Oct, Nov. Dec).

The reinvestments commitment stays in place. And in terms of interest rates they will remain on hold until "at least through the summer of 2019".

1.07pm BST

Today's decision is something of a surprise. Many economists had expected the ECB would delay a final decision on its QE programme until its July meeting.

But instead, Mario Draghi and colleagues have bitten the bullet and decided to stop buying eurozone government bonds with newly created money.

ING's @Carstenbrzeski on #ECB: Today's decision is a truly Solomonic compromise between the hawks and the doves. The hawks finally got their end-date for QE, while the doves still have their open door for more if needed. Nicely done.

1.01pm BST

You might have expected the euro to rally, on the back of the ECB's historic decision to end its huge bond-buying programme.

But instead, the single currency is dropping sharply - probably because the ECB has also promised not to raise interest rates for some time.

ECB tweaks forward guidance, gives a bit more detail on tightening plans. Will end QE in December and keep interest rates at current levels until at least through the summer of 2019. But keeps options open on the timing of rate hikes.
Euro and bond yields now falling. pic.twitter.com/EhCa0B2gMl

12.57pm BST

In another important move, the ECB has also pledged to keep interest rates unchanged until at least the middle of next year.

That means the headline cost of borrowing will probably remain at zero for many months to come. Banks will continue to be charged a negative interest rate of -0.4%, in an attempt to get them lending.

The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path.

12.51pm BST

NEWSFLASH: The European Central Bank has decided to end its bond-buying stimulus programme!

The ECB has decided to halve the pace of its QE programme after September to just a15bn per month, from a30bn per month at present.

At today's meeting, which was held in Riga, the Governing Council of the ECB undertook a careful review of the progress towards a sustained adjustment in the path of inflation, also taking into account the latest Eurosystem staff macroeconomic projections, measures of price and wage pressures, and uncertainties surrounding the inflation outlook.

Based on this review the Governing Council made the following decisions:

12.43pm BST

Today's meeting is in Riga, as part of the ECB's policy of taking the governing council around the eurozone.

But it's not great timing, as Latvia's central bank governor instead fighting corruption allegations and is barred by national authorities from even entering the central bank #awkward

12.22pm BST

Tension is mounting in the markets as we await the European Central Bank's decision on monetary policy, in under 25 minutes time.

"Usually hints on policy come from anonymous 'ECB sources' but last week's decision by the chief economist, Peter Praet, to go on manoeuvres and make statements about the QE programme could represent a major shift. It looks like the bank is prepared to discuss moving towards an end date for its QE programme, even if that end-date is still further away than many expect.

"To give the ECB its due, it does look like the eurozone recovery is firmly in place. As we discussed here, the eurozone economy is still seeing increased strength, with unemployment falling overall and consumer spending rising, and even recent weakness in the composite PMI is not necessarily a cause for concern given the overall strength of the past year.

12.15pm BST

There's more political drama in Greece; the opposition has called a no-confidence vote!

It's related to the "Macedonia issue". Earlier this week, the tiny Balkan state agreed to rename itself as the "Republic of North Macedonia" following negotiations with Greece (whose territory includes the province of Macedonia).

Greek opposition leader Kyriakos Mitsotakis calls for vote of no confidence against govt over 'deeply problematic' Macedonia name deal. Move aimed at highlighting coalition partner's objection to deal. Debate on motion to start at 6 pm, after vote on last set of bailout measures

Opposition leader Mitsoitakis announces no-confidence vote against govt #Greece #Macedonia https://t.co/pc2JDtvvLH

11.37am BST

Back in the eurozone, Greek MPs are preparing to vote today on the last omnibus bill of reforms-for-rescue funds the debt-stricken country must take before its current bailout ends.

"What there will be is a system of enhanced surveillance without preconditions, without money and without other measures."

At bailout bill debate, Communist MP Paphilis accuses government: "You are promising charity measures by increasing taxes on the poor." #Greece #Bailout pic.twitter.com/5lPzBH9Cjf

11.20am BST

Here's economics editor Larry Elliott on the recovery in UK retail sales last month:

Better weather brought some much-needed respite to Britain's struggling retail sector last month as the hottest May on record brought consumers flocking back to the high street.

The volume of goods sold in shops and online was 1.3% up on April - comfortably beating predictions in the financial markets of a 0.5% increase.

Warm weather and royal wedding boost May retail figures https://t.co/kkSd5RnGah

11.10am BST

The CBI's chief economist, Alpesh Paleja, is also worried about the underlying trends in UK retail:

Jump in #retail sales growth in the year to May, which @ONS attributed to good weather and the royal wedding. But underlying conditions for retailers are tougher, with real earnings growth still weak and structural shifts underway https://t.co/PFER40T3Mj

10.56am BST

Jacob Nell, Morgan Stanley's chief UK economist, cautions that "idiosyncratic factors" - including sunny weather and the Royal Wedding - flattered UK retail sales last month.

But still, the growth was broad-based:

10.42am BST

The jump in retail sales last month is encouraging, but it won't get Britain's high street out of trouble.

So argues Ben Brettell, senior economist at Hargreaves Lansdown, who points to the relentless advance of internet shopping:

Despite today's positive report from the ONS, news from individual companies continues to paint a somewhat gloomy picture for the UK's bricks-and-mortar retailers.

House of Fraser and Poundworld are the latest names to run into trouble. With the most recent set of numbers from online fashion retailer boohoo.com showing a 49% jump in UK sales, it's not difficult to work out where those high street customers have been going.

10.15am BST

Ian Gilmartin, head of retail & wholesale at Barclays Corporate Banking, is encouraged by the jump in retail sales:

"Record breaking temperatures in May had shoppers running to the tills to stock up on food and drink, with DIY and garden stores also receiving a boost from the warm weather. The really encouraging aspect to today's figures is the breadth of positive data, with growth posted across the different parts of the retail sector. We shouldn't get carried away as it's still very tough out there, but the truth is that despite continued rumours of the demise of our retail industry, many retailers are simply getting on with the job and continuing to attract customers through their doors.

Of course, we're not going to have a heatwave and a Royal Wedding to help drive sales every month, but the World Cup kick off should help supermarkets in particular maintain this momentum over the next month or so."

10.09am BST

The recent pick-up in UK wages may also be driving retail sales higher, suggests Chris Williamson of Markit.

UK retail sales buoyed by warm weather and Royal Wedding in May, but rising pay is also helping pic.twitter.com/OczNxUGbm1

10.01am BST

The unexpectedly strong UK retail sales figures have sent the pound sharply higher.

Sterling is up 0.5% at $1.344, as traders predict that an August interest rate hike is more likely.

Pound spikes higher on better-than-expected retail sales data pic.twitter.com/dAAVf8eAoM

9.52am BST

More on the Meghan and Harry effect from the ONS:

Food stores provided a positive contribution to growth with supermarkets commenting on good sales in celebration of the Royal Wedding during good weather.

9.47am BST

Newsflash: UK retail sales were stronger than expected in May, new figures from the Office for National Statistics show.

Sales volumes jumped by 1.3% compared to April, smashing forecasts of a 0.3% rise.

9.38am BST

Today's ECB meeting is the first since Italy's new coalition government was sworn in, and began announcing policies that could breach Europe's budget rules.

A clash is brewing between Brussels and Rome, even though Italy's new finance minister has insisted the country is committed to the euro.

Related: The EU v Italy's new government: which will blink first? | Barry Eichengreen

"We believe the ECB may be in a hurry to close the QE chapter,"

"We think this is essentially political, as the ECB would not want its monetary policy to be affected by claims of supporting or conversely impairing the new policy course in Italy."

9.16am BST

Economists and investors are split over whether the European Central Bank will make a decision about its stimulus programme today, or kick the can down the road to July's mereting.

Elsa Lignos of Royal Bank of Canada predicts the ECB will have an "active debate" about whether to let its QE programme expire in September.

The other point of focus should be the updated staff forecasts, and in particular the 2020 inflation forecast (currently at 1.7%). We look for an upward revision, which would be positive for the euro - though unclear whether that will be enough given yesterday's rally.

The first hike is currently priced for June 2019 but with the deposit rate [on bank deposits at the ECB] at -0.4%, there is a long way to go to get to neutral.

ECB President Draghi's extensive rehabilitation to overcome an addiction to easing seems to have paid off.

There are hopes of either 1) an announcement of the timetable to end bond buying, or 2) an announcement of an announcement of the timetable to end bond buying.

After more than three years of QE, and against the background of what Peter Praet judges to be improving inflation dynamics, the ECB is preparing to end its net asset purchases. Whether the formal announcement comes this week, or in July (our guess), and what profile the taper will take (a straight 3 months drawdown to zero, or something more creative) are the immediate questions.

But at this point in the process, a few months and a few extra billion in purchases either way are not crucial; the markets are more focused on how the ECB amends its interest rate guidance, any technical changes around bond reinvestments and whether Draghi delivers a relatively dovish taper by leaving the door open to the possibility of restarting the programme if the recovery were to splutter.

8.55am BST

European stock markets are in the red this morning, as central banks hog the headlines.

The FTSE 100 dropped nearly 50 points at the open (-0.6%) and there are similar losses in Frankfurt, Paris, Milan and Madrid:

As Fed chairman Jerome Powell acknowledges, the risk remains that officials overcook it and bring an end to the Trump trade once and for all.

Achieving the 'not too fast, not too slow' Goldilocks approach to monetary policy will be key to extending the equities bull run.

8.14am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The stakes are high for the ECB President, and for many people he has to send a message that the European central bank is planning to end its asset purchases' program and the date to start that has to be September.

There has been a lot of chatter leading up to this meeting and if, for whatever reason, Draghi fails to deliver what investors expect then the euro will be in trouble.

"The decision you see today is another sign the US economy is in great shape.

"Growth is strong, labour markets are strong, inflation is close to target."

Related: Federal Reserve raises US interest rates again amid trade relations fears

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