(Bloomberg). The European Central Bank will increase regular bond purchases by half an year in order to ease the end of its emergency debt-buying program. It will also loosen the rules for reinvestment around this crisis tool that can be used in case of market turmoil. 

Frankfurt officials confirmed their pandemic plan of 1.85 trillion euros ($2.1 trillion) in March. But they also said that asset sales under the older program, which was more conventional, would increase to 40 billion euros each month, starting in quarter 2. 

In the three months to follow, policymakers will reduce the spending by 30 billion Euros before returning to 20 billion in October.  

“Net purchases under the PEPP could also be resumed, if necessary, to counter negative shocks related to the pandemic,” the ECB said in a . 

The decision is an acknowledgment that emergency policy settings must come to an end in the face of the euro area’s fastest inflation since the single currency was created and as economic output nears pre-crisis levels.

But the move also takes into account the heightened uncertainty triggered by the resurgent pandemic, which is already weighing on the continent’s recovery and has halted economic growth in Germany.

The ECB’s announcement follows Wednesday’s decision by the to double the pace at which it tapers its own stimulus as it grapples with the biggest surge in consumer prices in three decades. Unexpectedly, the Bank of England became the first central bank in the Group of Seven to do so since the outbreak of the pandemic. 

Unlike the Fed, the ECB hasn’t so far abandoned its insistence that elevated price gains are transitory — driven by supply jams and soaring energy costs that will fade in 2022. Backing that view, IHS Markit said German inflation “might have peaked” as its latest gauge of activity showed Europe’s biggest economy stagnating in December.

“The progress on economic recovery and towards its medium-term inflation target permits a step-by-step reduction in the pace of its asset purchases over the coming quarters,” the ECB said. “But monetary accommodation is still needed for inflation to stabilize at the 2% inflation target over the medium term.”

President Christine Lagarde will elaborate on the ECB’s decisions at a press conference at 2:30 p.m. in Frankfurt. The fresh macroeconomic projections she’ll be armed with will show consumer-price growth back below the central bank’s 2% target in 2023 and 2024, according to people familiar with the matter.

This leaves the possibility of an increase in borrowing costs at some distance, while the benchmark deposit rate remains at -0.5%.

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