NEW YORK (Reuters) - The U.S. dollar rose more than a penny against a basket of major currencies as the euro cratered, and U.S. stocks closed higher on Thursday, as the European Central Bank signaled interest rate hikes were a long way off.

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., June 4, 2018. REUTERS/Lucas Jackson

The bank’s unexpectedly dovish decision overshadowed its statement that it aimed to wrap up its crisis-era stimulus program at the end of this year.

The ECB now plans to reduce monthly asset purchases between October and December to 15 billion euros until the end of 2018 and then conclude the program.

Investors, though, seized on comments indicating that interest rates would stay at record lows at least through the summer of 2019, and some analysts believed it may be longer, with ECB President Mario Draghi’s term due to expire at the end of October 2019.

The U.S. Federal Reserve on Wednesday decided to raise rates by a quarter of a percentage point, creating “a widening rate differential between the U.S. and Europe, and the dollar is the beneficiary,” said Ed Egilinsky, head of alternative investments at Direxion in New York.

The euro EUR= marked its steepest one-day drop against the U.S. dollar since June 2016, and was down 1.75 percent at $1.1583.

The dollar index .DXY, which measures the greenback against six other top currencies, rose 1.17 percent.

Ten-year government bond yields in Germany, the euro zone benchmark, fell around 6 basis points to 0.422 percent compared with Wednesday’s close DE10YT=RR.

Oil markets, pressured by the strengthening dollar and fears that OPEC countries could decide to increase output at a meeting next week, ended mixed.

West Texas Intermediate (WTI) crude oil futures CLc1 settled at $66.89 per barrel, up 0.38 percent, while Brent LCOc1 went the other way, settling down more than 1 percent at $75.94.

“The independent show of WTI strength is merely a catchup process to the higher priced products and Brent values,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

EQUITIES STRONG

Benefiting from the euro zone dovishness: stock markets on both sides of the Atlantic.

Two of Wall Street’s three main indexes closed in the black, with technology stocks leading the charge on the benchmark S&P; 500. Helping boost stateside equities was a Commerce Department report showing retail sales rose 0.8 percent last month, the biggest advance since November 2017.

The Dow Jones Industrial Average .DJI fell 25.89 points, or 0.1 percent, to 25,175.31, but the S&P; .SPX gained 6.86 points, or 0.25 percent, to 2,782.49 and the Nasdaq Composite .IXIC added 65.34 points, or 0.85 percent, to 7,761.04.

The ECB decision sent the pan-European FTSEurofirst 300 index .FTEU3 up 1.25 percent, buoyed by big gains in interest rate-sensitive sectors like autos and utilities.

In U.S. Treasuries, benchmark 10-year notes US10YT=RR last rose 12/32 in price to yield 2.9351 percent, from 2.979 percent late on Wednesday.

The 30-year bond US30YT=RR last rose 30/32 in price to yield 3.0545 percent, from 3.102 percent on Wednesday.

(GRAPHIC-Global asset performance since ECB signaled QE:reut.rs/2MrnMm0 )

LOOKING AHEAD

As the Fed and the ECB provided much of the week’s central bank fireworks, the Bank of Japan began a two-day policy meeting, though virtually no one was forecasting changes to its stimulative policy given recent signs of slowing growth.

Another issue that will keep investors in check is concern about U.S. threats to impose tariffs on $50 billion of Chinese goods. U.S. President Donald Trump was planning to meet with trade advisers to decide whether to activate the tariffs..

CBOT corn and soybean futures tumbled as uncertainty about tariffs and favorable crop weather in the U.S. Midwest prompted funds to liquidate big long positions. CBOT July corn 1CN8 fell to its lowest since mid-January, and front-month soybeans Sc1 dipped to a 9-1/2-month low.

In a rare merging of the sports and trading worlds, markets are gearing up for soccer’s World Cup in Russia, where time zone differences mean more matches during European, U.S. and Latin American trading hours than any previous tournament.

A study done during the last World Cup with similarly timed games, the 2010 finals in South Africa, showed trading volumes on share markets dropped by a third on average when matches were on and 55 percent when a market’s own team played.

(GRAPHIC-Changes in stock market trading volumes during 2010 World Cup: reut.rs/2JGea55)

(GRAPHIC-Global assets in 2018: tmsnrt.rs/2jvdmXl)

(GRAPHIC-Emerging markets in 2018: tmsnrt.rs/2ihRugV)

Slideshow (3 Images)

(GRAPHIC-World FX rates in 2018: tmsnrt.rs/2egbfVh)

(GRAPHIC-MSCI All Country World Index Market Cap: tmsnrt.rs/2EmTD6j)

(This version of the story corrects to show euro makes biggest daily fall in 2 years, not hitting lowest level in 2 years.)</s>The European Central Bank (ECB) outlined plans to end its massive stimulus program by the end of this year, but keep interest rates steady until next summer.

The bank said Thursday that if incoming data followed its forecasts, then its monthly bond purchase program would be extended through to the final quarter of the year, though at a lower pace. This means the program would likely end in December if the euro zone economy remained resilient.

Until now, this quantitative easing (QE) program was scheduled to last until September, carrying monthly purchases of 30 billion euros ($35 billion) of government and private debt. This will now be reduced to 15 billion euros during the last three months of 2018.

Furthermore, the ECB also indicated that a rate hike is unlikely to come before the summer of 2019, again depending on data.

"The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary," the ECB said in its statement.</s>
• The European Central Bank on Thursday announced plans to end quantitative easing by December.
• The central bank has undertaken an unprecedented program of stimulus since the eurozone debt crisis.
• The euro slid on the announcement, falling close to 1% from its daily high.

The European Central Bank on Thursday announced plans to end the €2.5 trillion ($3 trillion) bond-buying program known as quantitative easing that it has undertaken since the eurozone debt crisis.

Bond purchases, now running at a maximum of €30 billion ($35.3 billion) a month, will be lowered to €15 billion ($17.65 billion) a month in September before being stopped at the end of December, the ECB said.

"The Governing Council anticipates that, after September 2018, subject to incoming data confirming the Governing Council's medium-term inflation outlook, the monthly pace of the net asset purchases will be reduced to €15 billion until the end of December 2018 and that net purchases will then end," the ECB said in a statement.

Elsewhere, the central bank left its interest rates unchanged, meaning a deposit rate of -0.4%.

It said it expected rates to remain at their current levels "at least through the summer of 2019," adding that rates would stay put "as long as necessary to ensure that the evolution of inflation remains aligned with the current expectations of a sustained adjustment path."

The euro slipped a little against the dollar on the news, falling about 0.35% on the day, to €1.1751 as of 1 p.m. BST (8 a.m. ET), as the chart below shows:

Market reaction was reasonably subdued, as the announcement about quantitative easing was widely expected.

"For the first time in a long time, the statement accompanying the interest rate (non)decision is altered significantly compared to the April statement. As expected, the central bank is signalling an end to QE later this year via a three-month taper, albeit with an optionality to change position if the data deteriorates," Claus Vistesen, the chief eurozone economist at Pantheon Macroeconomics, said in an email.

The ECB's president, Mario Draghi, is scheduled take questions from the media at 1:30 p.m. BST (8:30 a.m. ET) to discuss the bank's decision.

The ECB shifts its policy meeting from Frankfurt, Germany, to a eurozone capital once a year, and Thursday's gathering is being held in Riga, Latvia.</s>RIGA, Latvia (AP) - The Latest on the European Central Bank's monetary policy meeting (all times local):

In response to a question about populist politicians' claim that the euro is not good for some countries, the head of the European Central Bank says the share currency is irreversible.

Mario Draghi said Thursday that "it doesn't pay at all to discuss the existence of something that's irreversible. It can only create damages."

Italy's new populist government is a coalition between the anti-establishment 5-Star Movement and the anti-immigration League. The parties have promised spending that could lead to Italy violating eurozone limits on deficits. At various times the parties have also questioned Italy's membership in the euro itself.

That jolted financial markets last month, though Italy's new finance minister has helped calm investors by saying recently that his country has no intention to leave the currency union.

The European Central Bank has trimmed its forecast for economic growth this year but raised its predictions for inflation.

The bank said Thursday that it dropped it prediction for growth in the 19-country eurozone this year to 2.1 percent from 2.4 percent previously.

It said that annual inflation is expected to average 1.7 percent this year and through 2020. That is up from previous forecasts of 1.4 percent for this year and 1.4 percent in 2019.

The ECB on Thursday said it was phasing out its bond-buying stimulus program after the end of this year. The program is credited with raising inflation to the ECB's target of just under 2 percent. Inflation was 1.9 percent in May, but the bank needs to be sure the higher rate will persist.

The euro has dropped sharply after the European Central Bank said it will end its bond-buying stimulus program after December.

The currency shared by 19 countries fell from $1.1820 to $1.1725 within minutes of the central bank's announcement.

The stimulus program has since 2015 been pumping newly created money into the financial system, driving down longer-term interest rates for borrowers such as governments and home buyers. The program has helped raise inflation and growth in the eurozone, and some investors appear to worry about the consequences of removing that support.

The European Central Bank says it will phase out its bond-buying stimulus program at the end of the year.

The program has driven down borrowing costs and supported an economy recovery in the 19 countries that use the euro.

The bank said after Thursday's meeting of its 25-member governing council that the purchases would be reduced to 15 billion euros a month from 30 billion euros from October and then wound up completely in December.

The statement also said its interest rates would not rise until at least summer 2019.

The bank's move toward the exit comes a day after the U.S. Federal Reserve decide to make its second interest rate increase this year and indicated more were coming. The central banks are withdrawing stimulus efforts that started during the Great Recession as their economies recover.

The European Central Bank is meeting to discuss when and how to end its bond-buying stimulus program, an exit that will have far-reaching consequences across the economy.

The bank, which sets monetary policy for the 19 countries that use the euro, has been buying 30 billion euros ($35.5 billion) a month in government and corporate bonds from banks. The purchases are slated to run at least through September, and longer if necessary.

Analysts say that decisions on the exit path, which could include several intermediate steps, might come Thursday or at the next meeting, July 26. Scenarios include reducing the purchases past September, and then stopping them at year-end.

Copyright 2018 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.</s>* ECB to end bond buys, see rates steady through mid-2019

* Euro set for biggest daily fall vs dlr since Oct

* Markets see less than 30 pct chance of June 2019 rate rise (Updates throughout, adds quotes charts)

LONDON, June 14 (Reuters) - Euro zone bond yields tumbled and the euro headed for its biggest daily loss versus the dollar in eight months on Thursday after the European Central Bank indicated it would not be raising interest rates through the summer of 2019.

The bank’s unexpectedly dovish guidance on interest rates overshadowed, at least for the time being, its statement that it aimed to wrap up its stimulus programme at the end of this year — marking the biggest step in dismantling crisis-era stimulus — quantitative easing.

The ECB now plans to reduce monthly asset purchases between October and December to 15 billion euros until the end of 2018 and then conclude the programme, though ECB President Mario Draghi stressed that the governing coucil stood ready “to adjust all its instruments as appropriate”.

However, investors seized on comments indicating that the end of QE would not be followed by rapid policy tightening, and that interest rates would stay at record lows at least through the summer of 2019.

Some market players now reckon rates may not rise even in the months immediately after next summer, noting that Draghi’s tenure at the ECB would end in October 2019.

“Although we now know that QE is scheduled to end under Draghi’s watch, we think the ECB could wait a little longer before starting to raise interest rates,” said David Zahn, head of European fixed income for Franklin Templeton.

“With Draghi’s term of office due to expire at the end of October 2019, we feel the ECB is unlikely to start increasing interest rates until the new ECB president is firmly in place.”

The single currency is currently on track for its biggest one-day loss since October against the dollar, while it also fell one percent to the yen and half a percent to the Swiss franc .

Bond investors, meanwhile, drew comfort from the dovish interest rate outlook, with 10-year government bond yields in Germany, the euro zone benchmark, falling around four basis points to 0.44 percent.

Analysts also noted that there were no changes to the ECB’s plan to reinvest funds from maturing bonds, providing a layer of support for bonds markets even as the central bank winds down QE.

Bond yields from Italy, the country seen as the most vulnerable to higher borrowing costs, also fell, with short-dated yields down 7 basis points at 0.89 percent , having been 9 bps higher shortly before the ECB statement.

Italian 10-year yields were down around 2 bps at 2.80 percent.

Draghi noted that volatility in Italy had ebbed in the past two weeks but revised down economic growth forecasts for the euro zone for 2018, while noting that inflation, after accounting for higher oil prices, remained muted

Karen Ward, chief market strategist at JPMorgan Asset Management, said the move to end QE by end-year as previously signalled was significant in light of the recent Italian mini-crisis that saw bond yields there soar to multi-year highs.

“Stepping back from QE will insulate the ECB from potential criticism that it is funding the fiscal largesse associated with certain populist policies.”

But the ECB stance has surprised markets, partly because ECB policymakers such as chief economist Peter Praet, have in recent weeks indicated the central bank remained undeterred by events Italy or economic data indicating a slowdown in euro zone growth momentum.

“The hawks had been guiding for a June hike before the meeting and given the clear guidance the ECB gave today on interest rates, it had to be priced out,” said Arne Petimezas, an analyst at AFS Group, an Amsterdam-based brokerage.

Money market pricing accordingly reflected a scaling ack of rate-hike bets over the next year.

Investors now price less than a 30 percent chance of a 10 basis point rate hike in June 2019, compared with a roughly 80 percent chance before the ECB announcement.

On equity markets, an index of euro zone stocks - which benefit from a weaker euro - jumped 0.8 percent to a 2 1/2 week high, having languished in negative territory before the announcement.

The biggest beneficiaries were interest-rate sensitive sectors such as autos which rose 1.8 percent, while shares in utilities rose 0.6 percent.

Bank stocks, which tend to gain from higher interest rates, fell 0.5 percent on the day but JPM’s Ward played down that move.

“If low interest rates support the health of the economy – not least via a weaker exchange rate – then that will help demand for lending and volume bank lending,” she said.</s>
• The European Central Bank said Thursday it will end its bond-buying program in December.
• The central bank also said it expects to keep rates unchanged through the summer of 2019.
• The euro fell 0.55% against the greenback following the announcements.

The euro slid versus the dollar Thursday after the European Central Bank said it would end its €2.5 trillion ($3 trillion) bond-buying program at the end of the year and expects to keep rates steady through next summer.

The euro was down 0.56% against the dollar at 8:30 a.m. ET.

The ECB said in a statement that the large-scale stimulus program, which has been in place since 2015 amid the eurozone debt crisis, will end in December. The level of monthly bond purchases, currently at €30 million ($35 million), is set to be cut in half starting in September.

The central bank said it expects to keep rates unchanged "at least through the summer of 2019." It revised its inflation forecast for the next years from 1.4% previously to 1.7%.

"Underlying inflation is expected to pick up towards the end of the year and thereafter to increase gradually over the medium term, supported by our monetary policy measures, continuing economic expansion, corresponding absorption of economic slack, rising wage growth," ECB President Mario Draghi said.

The announcement comes one day after a relatively hawkish Federal Reserve policy meeting, where officials raised the fed funds rate by 25 basis points to a target range between 1.75% and 2%. The central bank also signaled there would be two more hikes this year, more than previously expected.

The euro is down 2.44% versus the dollar this year.</s>RIGA, Latvia (AP) - The Latest on the European Central Bank's monetary policy meeting (all times local):

The euro has dropped sharply after the European Central Bank said it will end its bond-buying stimulus program after December.

The currency shared by 19 countries fell from $1.1820 to $1.1725 within minutes of the central bank's announcement.

The stimulus program has since 2015 been pumping newly created money into the financial system, driving down longer-term interest rates for borrowers such as governments and home buyers. The program has helped raise inflation and growth in the eurozone, and some investors appear to worry about the consequences of removing that support.

The European Central Bank says it will phase out its bond-buying stimulus program at the end of the year.

The program has driven down borrowing costs and supported an economy recovery in the 19 countries that use the euro.

The bank said after Thursday's meeting of its 25-member governing council that the purchases would be reduced to 15 billion euros a month from 30 billion euros from October and then wound up completely in December.

The statement also said its interest rates would not rise until at least summer 2019.

The bank's move toward the exit comes a day after the U.S. Federal Reserve decide to make its second interest rate increase this year and indicated more were coming. The central banks are withdrawing stimulus efforts that started during the Great Recession as their economies recover.

The European Central Bank is meeting to discuss when and how to end its bond-buying stimulus program, an exit that will have far-reaching consequences across the economy.

The bank, which sets monetary policy for the 19 countries that use the euro, has been buying 30 billion euros ($35.5 billion) a month in government and corporate bonds from banks. The purchases are slated to run at least through September, and longer if necessary.

Analysts say that decisions on the exit path, which could include several intermediate steps, might come Thursday or at the next meeting, July 26. Scenarios include reducing the purchases past September, and then stopping them at year-end.</s>LONDON (Reuters Breakingviews) - A staggered exit from quantitative easing is the most Mario Draghi can do. The European Central Bank said on Thursday it expected to stop adding to its bond portfolio via purchases of sovereign and corporate debt. But the exit is qualified by caveats, and a pledge to keep rates low. Trade wars and a weak euro zone mean the ECB president has little choice but to keep his options open.

The ECB’s statement that it expects to stop increasing the size of its bond portfolio at the end of December marks the official end of the money printing experiment begun in 2015. It looks about time: growth is healthy, and the central bank expects inflation to average 1.7 percent over the next two years, close to its target. Employment in the euro area is at a record high.

Yet it’s an awkward time to take risks. Growth, while above the euro zone’s potential, is still expected to fall this year to 2.1 percent from last year’s 2.5 percent. Political risks are growing: the United States is threatening Europe with a trade war. The Italian government meanwhile wants to push up its deficit, and unpick reforms.

That puts the ECB in a tricky position: if it keeps buying bonds, it can be accused of facilitating Italy’s rebellious government. If it stops abruptly, and market expectations of rate increases cause bond yields to rise sharply, investors could worry about Italy’s ability to service its debt, currently 132 percent of GDP.

In that tricky context, the ECB’s complex move looks sensible. It anticipates ending quantitative easing in December, but that is contingent on inflation numbers. And it said rates would not rise until September next year. Moreover, principal proceeds from the 2.4 trillion euros of bonds it already owns will be invested for as long as necessary.

The euro fell, as did German bond yields. The relatively benign market reaction will make it easier for the ECB to creep towards the exit. Yet it’s task will probably get harder. The Italian government’s demands for fiscal leniency and tougher migration rules could hurt confidence, and increase fears over the euro zone breaking up. A global trade war would particularly hurt Germany, Europe’s largest economy. Quantitative easing is ending, but normal monetary policy is way off.</s>BRUSSELS/FRANKFURT/PARIS (dpa-AFX) - Markets in Europe got off to a weak start Thursday and remained locked in a narrow range during the first half of the session. However, the markets rallied higher in the second half of the session after the European Central Bank revealed plans to put an end to its bond purchases.



European Central Bank President Mario Draghi warned on Thursday that risks from global factors such as protectionism has increased after the bank signaled that it would end its massive bond-buying program at the end of this year. 



'Uncertainties related to global factors, including the threat of increased protectionism, have become more prominent,' Draghi said in the introductory statement to his press conference. 



'Moreover, the risk of persistent heightened financial market volatility warrants monitoring.'



Earlier on Thursday, the bank announced that it hopes to halve its monthly bond purchases to EUR 15 billion after September and to end them in December. 



The Governing Council, which held the latest policy session the Latvian capital Riga, left the key interest rates unchanged. The bank said interest rates will remain at their present level at least through the summer of 2019 and beyond, if necessary.



The pan-European Stoxx Europe 600 index advanced 1.41 percent. The Euro Stoxx 50 index of eurozone bluechip stocks increased 1.37 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.56 percent.



The DAX of Germany climbed 1.68 percent and the CAC of France rose 1.39 percent. The FTSE 100 of the U.K. gained 0.81 percent and the SMI of Switzerland finished higher by 0.65 percent.



In Frankfurt, Volkswagen rose 1.68 percent after German prosecutors imposed a 1 billion euros fine on the automaker in connection with its emissions-cheating scandal.



Bertrandt Group lost 2.83 percent after posting disappointing first-half financial results. 



Leasing company Grenke sank 2.44 percent after announcing a capital increase.



In Paris, Renault rose 1.46 percent. The Financial Times reported that Carlos Ghosn is likely to step down as chief executive of the company before his term ends in 2022.



In London, Rolls Royce Holdings advanced 6.54 percent on a Bloomberg report that the jet engine manufacturer plans to eliminate about 4,000 jobs as part of efforts to simplify its business and boost profit margins.



Aveva Group surged 12.01 percent. The company's fiscal 2018 profit before tax, on a statutory basis, dropped 8.8 percent, but it maintained its proposed final dividend at 27.0 pence per share.



Unilever dropped 2.81 percent after it confirmed that it continues to expect underlying sales growth in the 3 percent - 5 percent range for the full year. The company also said it is extremely unlikely to be included in FTSE UK series.



Industrial production in China was up 6.8 percent on year in May, the National Bureau of Statistics said on Thursday. That was shy of expectations for 7.0 percent, which would have been unchanged from the April reading.



Germany's consumer price inflation accelerated, as initially estimated, on energy prices in May, final data from Destatis showed Thursday. 



Consumer prices climbed 2.2 percent year-on-year in May, faster than the 1.6 percent increase in April but in line with the estimate published on May 30. The last time the inflation rate reached this level was in February 2017.



France's consumer price inflation accelerated as initially estimated in May, latest figures from the statistical office Insee showed Thursday. Consumer prices climbed 2.0 percent year-over-year in May, faster than April's 1.6 percent rise. That was in line with the flash data published on May 31.



UK retail sales growth accelerated more than expected in May, figures from the Office for National Statistics revealed Thursday. Retail sales volume including auto fuel, grew 1.3 percent month-on-month, following April's 1.8 percent increase. This was the second consecutive rise in sales and much bigger than the expected 0.5 percent.



UK house price balance improved more than expected in May, reports said citing the Royal Institution of Chartered Surveyors on Thursday. The house price balance rose to -3 percent in May from -7 percent in April. The expected level was -5 percent.



Reflecting strong sales growth throughout much of the sector, the Commerce Department released a report on Thursday showing a much bigger than expected increase in U.S. retail sales in the month of May.



The Commerce Department said retail sales jumped by 0.8 percent in May after climbing by an upwardly revised 0.4 percent in April. Economists had expected retail sales to rise by 0.4 percent compared to the 0.3 percent increase originally reported for the previous month.



A report released by the Labor Department on Thursday showed an unexpected decrease in first-time claims for U.S. unemployment benefits in the week ended June 9th. The report said initial jobless claims edged down to 218,000, a decrease of 4,000 from the previous week's unrevised level of 222,000. Economists had expected initial jobless claims to inch up to 224,000.



Import and export prices in the U.S. both increased by more than anticipated in the month of May, the Labor Department revealed in a report released on Thursday.



The Labor Department said import prices climbed by 0.6 percent in May, matching the upwardly revised increase in April. Economists had expected import prices to rise by 0.5 percent.



Export prices also increased by 0.6 percent in May, matching the growth reported for the previous month. Export prices had been expected to rise by 0.3 percent.



Business inventories in the U.S. increased in line with economist estimates in the month of April, according to a report released by the Commerce Department on Thursday. The Commerce Department said business inventories rose by 0.3 percent in April following a revised 0.1 percent dip in March.



Economists had expected inventories to rise by 0.3 percent compared to the virtually unchanged reading originally reported for the previous month.



Copyright RTT News/dpa-AFX</s>RIGA, Latvia — The European Central Bank is meeting Thursday to discuss when and how to end its bond-buying stimulus plan, an exit that will have far-reaching consequences across the economy.

The bank, which sets monetary policy for the 19 countries that use the euro, has been buying 30 billion euros ($35.5 billion) a month in government and corporate bonds from banks. The purchases are slated to run at least through September, and longer if necessary.

Analysts say that decisions on the exit path, which could include several intermediate steps, might come Thursday or at the July 26 meeting. Scenarios include reducing the purchases past September, and then stopping them at the end of the year.

An end to the stimulus would be part of a major shift in the global economy. The ECB would be joining the U.S. Federal Reserve in withdrawing the massive monetary stimulus deployed to combat the Great Recession and its aftermath. The Fed raised its key rate at its meeting Wednesday.

The ECB’s bond purchases, which started in March 2015, pump newly printed money into the economy, which in theory should help raise inflation toward the bank’s goal of just under 2 percent. Inflation was an annual 1.9 percent in May, but the bank needs to be able to say that inflation will stay in line with its target even after the stimulus is withdrawn.

The impact of the ECB’s bond-buying stimulus has been felt across the economy.

It has pushed up the prices of investments like stocks, bonds and real estate but also lowered returns for savers. It has helped keep borrowing costs low for European governments as the ECB purchases have driven bond prices up and yields down. Yields and prices move in opposite directions.

For example, the Italian government, which is burdened with the second-highest debt load in the eurozone after Greece at 132 percent of gross domestic product, pays only 2.88 percent annually to borrow for 10 years. That’s less than the 2.95 percent yield on 10-year U.S. Treasurys.

The ECB meeting will be held in Riga, Latvia, as one of the ECB’s occasional road meetings away from its Frankfurt headquarters to underline its role as a pan-European institution. A bribery investigation is expected to keep the head of the host central bank, Ilmars Rimsevics, from attending the meeting and news conference with ECB President Mario Draghi.

The ECB is continuing its slow progress toward withdrawing the stimulus despite turbulence in Italy, where the new populist government has questioned the spending and debt restrictions required of euro members. Concerns over Italian politics caused big swings in the country’s financial markets for several days last month, before easing.

Analysts say the ECB may soon have to end its stimulus program anyway as it risks running out of bonds that are eligible for purchase. And with the purchases widely expected to be stopped at the end of this year, they said, attention could now turn to how long the bank will wait after the bond-purchase exit before starting to raise its interest rates. Currently, the main interest rate is at zero.

Copyright 2018 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
The value of the euro falls by one percent after the European Central Bank announces it expects to halve net bond purchases to €15 billion per month from October to December, then end "quantitative easing" by the close of the year, while not raising interest rates.