ECB lifts inflation forecast as it ends stimulus


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The program, under which the central bank has been buying tens of billions of bonds each month, helped support the economy by keeping borrowing costs low for households and businesses.

The move is a major step towards dismantling the policies brought in to stabilise the eurozone in the wake of the financial crisis.

Interest rates remained unchanged at the ECB's June meeting.

There are also so investors who believe the European Central Bank will refrain from signaling changes to its stimulus program given the potential for renewed tensions in Italy and Spain as well as recent weaker-than-expected economic data in the Euro Zone.

It also lifted sterling 1pc higher against the euro to €1.1460, its strongest gain on the currency in 2018, while another rout in emerging markets currencies sparked by the Fed eased.

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In early Asian trade on Friday, it eased 0.1 percent lower to Dollars 1.15595, its lowest level since May 30. The currency was down 1.72 percent on the week, positioning it to have its biggest weekly loss since November 2016. "But we obviously have huge daily volatility coming from Italy as well so I wouldn't over-read the first reaction", he said.

The U.S. central bank, which on Wednesday raised rates for the second time this year, is expected to raise short-term interest rates two more times in 2018 and likely to lift them three times in 2019, according to a Reuters poll. The very gradual tightening of monetary policy comes as higher oil prices pushed European Central Bank staff to revise their forecast for inflation slightly upward for 2018, and a slow first quarter prompted them to revise their forecast for GDP growth slightly downward.

Analysts said they foresaw further pain for the euro in the near-term citing slowing growth in the euro zone, political instability in Italy and global trade tensions. Insurer FBD was up nearly 1.4pc at €11.05, while Bank of Ireland dipped 0.7pc to €7.05.

The Dow Jones Industrial Average fell 25.89 points, or 0.1 per cent, to 25,175.31, the S&P 500 gained 6.86 points, or 0.25 per cent, to 2,782.49 and the Nasdaq Composite added 65.34 points, or 0.85 per cent, to 7,761.04.

The greenback was up 1 per cent versus its Japanese peer on the week, during which it brushed a three-week peak of 110.850 after the Fed's policy announcement on Wednesday.

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The currency pair, sensitive to shifts in risk appetite in the broader markets, could be impacted by developments later on Friday in the U.S.

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Brad Holland, director of investment strategy, Nutmeg, said: "The ECB has decided enough is enough and announced plans to turn off the liquidity tap into European government bond markets". The marginal lending facility rate is 0.25 percent.

Two of the globe's most powerful central banks are gradually withdrawing the easy money policies that helped fix the damage wrought by the Great Recession and push stock markets to record highs.

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