ECB seen going all the way on QE as economists doubt taper

By Paul Gordon & Andre Tartar

The European Central Bank won?t end its asset-buying program early, though it might do so abruptly, economists say.

More than two-thirds of respondents in a Bloomberg survey said the ECB will stop quantitative easing in September 2016, as currently planned, and most of those said it?ll do so without tapering purchases. The remaining analysts said policy makers will gradually wind the program down, with the end-date ranging from December 2016 to December 2017.

Massive stimulus from record-low borrowing costs, a weaker euro and cheaper energy is stoking speculation over how quickly the ECB might reach its inflation goal and complete a 1.1 trillion-euro ($1.2 trillion) program that started only last month. The risks related to policy tightening were highlighted in 2013 when global market volatility escalated as the Federal Reserve signaled it was ready to taper its own QE.

?One could argue that if inflation gets on the right track before the summer of 2016, some tapering appears in May, but then they are likely to miss their balance-sheet expansion target,? said Julien Manceaux, senior economist at ING Belgium SA in Brussels. ?This is why we do not think there will be tapering before the program stops.?

Bond Purchases

To spur inflation, the ECB intends to expand its balance sheet to about 3.1 trillion euros from 2.3 trillion euros currently, in part by buying government bonds, agency debt and private securities. Economists in the survey predicted that level will be surpassed in 2016 and reach 3.4 trillion euros by the end of that year.

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