Putting an end to the net purchases eliminates the timing element of forward guidance in a way, as a date has thus far only been named for the purchase programme. In addition, the link between the end of the net purchases and a sustainable correction of inflation consistent with the inflation aim is severed.
However, the interest rate path and the point at which reinvestment is to come to an end will evidently depend on prospective inflation developments. Moreover, the Eurosystem’s forward guidance has thus far not focused explicitly on the sequence of the first interest rate hike and the end of reinvestment. If we take the Fed’s sequencing as a blueprint, the interest rate hike comes first.