Questions and answers on the extended asset purchase programme (APP) of the European Central Bank

With inflation remaining low, expectations for it falling and the economy in the euro area staying weak, the Governing Council of the European Central Bank decided at its meeting in September 2019 to ease monetary policy with a varied package of measures. One of these measures was that monthly asset purchases of 20 billion euros were restarted from November. Like in previous years the asset purchases will cover various asset classes, and the programme will cover the third covered bonds purchase programme (CBPP3), the asset backed securities purchase programme (ABSPP), the public sector purchase programme (PSPP) and the corporate sector purchase programme (CSPP).

Asset purchases have been used as monetary policy measures by the Eurosystem throughout almost the entire period since the global financial crisis. The asset purchase programme became more broadly based in 2015 when purchases of public sector bonds started and several separate earlier programmes were consolidated into one single large programme. The asset purchases of the Eurosystem reached as much as 80 billion euros a month at times. Further asset purchases were stopped in December 2018, at which point the balance sheet of the Eurosystem contained 2.6 trillion euros of bonds bought under the programme and inflation appeared to have hit a sustainable upward trend. By September 2019 the forecasts for economic growth and inflation for the years ahead had fallen though, and the Governing Council of the European Central Bank decided to restart asset purchases. The Governing Council expects the asset purchases to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates. As before, the Governing Council intends to continue reinvesting in full the principal payments from maturing securities purchased under the asset purchase programme.