The European Central Bank (ECB) has confirmed it will end a huge programme to stimulate the eurozone economy in December.
The ECB will stop its bond-buying scheme, worth €30bn a month, as long as economic data remains favourable.
The move is a major step towards dismantling the policies brought in to stabilise the eurozone in the wake of the financial crisis.
However, the ECB said it was keeping interest rates on hold for now.
In a statement, the bank said: “The governing council will continue to make net purchases under the asset purchase programme at the current monthly pace of €30bn until the end of September 2018.”
After that, it expects to reduce purchases to €15bn a month until the end of December 2018, when “net purchases will then end”.
The ECB began its asset purchase programme in 2015, years after the UK and US took similar action to shore up their economies.
It has so far pumped more than two trillion euros into the bloc’s economy, while keeping interest rates at or near zero.
It argues this has countered deflation and staved off a deeper economic crisis, but has long signalled it would gradually wind the programme down, with September flagged as the likely cut-off point.
The decision will surprise some analysts, however, as the bloc’s recovery has stuttered recently.
There is also mounting concern over political upheaval in Italy, higher oil prices and the threat of a trade war with the US.
Jennifer McKeown, chief European economist at Capital Economics, said questions will be asked about the move to cut stimulus at a time when there are concerns over the eurozone economy and Italy’s political situation.
“Recent hard data suggest that [the eurozone’s] first quarter slowdown was less temporary than the Bank had seemed to assume,” she said.
The ECB said it expects its key interest rate to remain at zero until “at least through the summer of 2019” and “as long as necessary” to ensure inflation remains in line with expectations.
This is in line with investors’ expectations.
It has held back on raising rates, unlike the US and the UK, as inflation in the bloc remains stubbornly below its target of almost 2%.
The euro slipped half a per cent against the dollar following the announcements to $1.1728.
Patrick O’Donnell, senior investment manager at Aberdeen Standard Investments, said the ECB’s decisions gave a “cautious message”.
“By saying the QE programme will end this year but not signalling a rate hike until at least next summer Mr Draghi is giving with one hand and taking away with the other.
“At this stage he’s committed himself to waiting until at least the second half of next year to raise rates. This will comfort markets but we must remember that at this stage it is just a guide and not a guarantee.”