The ECB is sending a clear signal that it will exit its QE program by the end of this year. The ECB’s announcement is courageous as risks to the euro area outlook have increased significantly in recent months. Yet the announcement is wise as the ECB needs to prepare markets early in order to avoid the Fed’s taper tantrum of a few years ago.
Yet the ECB is maintaining enough flexibility to react to risks, should they materialize. Unfortunately, it is still too early for the ECB to make a full commitment to an exit from its expansionary monetary policy stance.