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CCTV Script 14/12/18

— This is the script of CNBC's news report for China's CCTV on December 14, 2018, Friday.

The ECB announcement can be said a landmark for markets and for the ECB itself, the European central bank announced that it would end its quantitative easing (QE) policy at the end of December this year. That means, after four years of sticking to its bond-buying program, the European central bank has formally ended its attempt to save the Eurozone economy by improving its balance sheet.

Since its official launch in March 2015, the ECB has implemented three rounds of quantitative easing. This is seen as following the ultra-loose monetary policy adopted by the US during the financial crisis from 2008 to 2014.

As you can see from this chart, from the beginning of QE to the present, the ECB has purchased 2.6 trillion euros of bonds, most of which are purchased by the public sector.

That has fueled the ECB's balance sheet to about 4.65 trillion euros so far, second only to the bank of Japan among the world's major central Banks.

The ECB's December rate decision also left the three main interest rates unchanged, in line with market expectations. There is also concern about the ECB's rhetoric change on "reinvestment". We know that when the central bank operates QE policy, it reinvests the principal of maturing bonds, so the central bank's statement on reinvestment implies the degree of policy easing. Instead of saying "continue to reinvest after QE ends ", the statement said" continue to reinvest after the first rate rise". This is seen as a sign that the ECB's reinvestment will continue long enough to maintain favorable liquidity conditions and the abundance of monetary easing, meaning that the statement is dovish and monetary policy is likely to remain loose.

The ECB's decision to end QE was seen as the last option, For the European economy, both economic growth and underlying inflation have failed to reach satisfactory levels, and the outlook is considered negative and faces a series of risk factors. Some policymakers want to reinforce downside risks, fearing that the economy may not be strong enough to support a complete withdrawal of such unconventional stimulus measures.

Mario Draghi

President of the European Central Bank"the balance of risks is moving to the downside owing to the persistence of uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets, and financial market volality."

The argument goes that the ECB signaled early that it would end QE, and therefore had to end QE in order to maintain its credibility. In his speech, the central bank's President, Mario Draghi, said there was no time to discuss a rate rise but that he expects to leave rates unchanged at least until the end of the summer of 2019. Although the ECB ended QE, monetary policy remains loose for now.