Monetary policy to be normalised gradually and in a predictable manner

Abstract

The Governing Council of the ECB anticipates that net asset purchases under the asset purchase programme (APP) will be phased out by the end of 2018. The decision can be seen as a first step towards normalisation of monetary policy in the euro area, which signifies that the Governing Council will gradually withdraw non-standard monetary policy measures and communicate accordingly. There are more open questions associated with monetary policy normalisation than with conventional monetary tightening. Due to uncertainties relating to the effects of monetary policy normalisation on the financial markets and the real economy, it is likely that normalisation will be a long and gradual process.