As you all know, at the Bundesbank we are critical of government bond purchases because they increasingly blur the boundaries between monetary and fiscal policy. I’ll come to the other consequences in just a minute.
The decision of the ECB Governing Council to reduce net bond purchases from 1 January 2018 from € billion to € billion and to continue the programme until at least September next year certainly doesn’t amount to slamming on the monetary policy brakes – it’s the equivalent of removing the accelerator from the floor – but only ever so slightly.