LONDON, (Reuters) – The European Central Bank reduced support for the euro area economy by one notch on Thursday. However, it promised generous support for 2022. This confirms its relaxed inflation outlook and indicates that an exit from ultra-easy policies will take place slowly.

Germany’s 10-year Bund yield rose 4 basis points at -0.32% after a surprising Bank of England rate rise, and the Italian yields for 10-years increased 8 bps.

The following is an analysis of the latest move by analysts:

SIMON HARTVEY, SENIOR TRADEMARKIST, MONEX EUROPE

“ECB reveals a small bridge between PEPP & APP. Following a significant hawkish surprise by the Bank of England’s, the European Central Bank decided to be more in line market expectations.

“The decision is on the hawkish end of expectations, as it wasn’t known if the ECB would announce a bridging scheme for PEPP once PEPP expires. This was due to the uncertainty around Omicron Lockdown Measures in many eurozone countries.

ARNE PETIMEZAS and AFS GROUP

“Pandemic QE is over as per plan in March 2022. It is possible that the tiering multiplier could be increased in the middle of next fiscal year. This means the ECB may use tiering in order to control the fall in balance sheets once banks begin to repay the TLTROs by June 2022. It was a pleasant surprise.

TD SECURITIES

The decision gives markets more clarity than they were expecting, and the APP is firmly in place through 2022. The hawkish message suggests that the APP will end sometime between 2023 and 2023 with rates increasing shortly after.

We’ll be looking for more information on President Lagarde’s vision of the APP in 2023. Also, what this might mean for rates. We expect 2024 inflation to be 1.8%. This will underline the importance of the ECB’s continued policy presence.

HUSSAIN MEHDI, MACRO, AND INVESTMENT STRATEGIST at HSBC ASSET MANAGEMENT

“Following hawkish outcomes from the Fed and BoE meetings, the ECB chose a more dovish approach within the context Omicron uncertainty. It maintains a flexible approach for asset purchases in 2022, with the additional implication that rate increases remain a ways off.”

ABN AMRO, AS:

“Overall, there is a cushioning effect to the PEPP’s demise due to a longer period for reinvestments in the PEPP as well as a stepped up APP likely to last through 2022.

“In addition to that, the 2024 inflation projection of the Fed (which we anticipate to be slightly lower than target and will be released shortly) will indicate a longer period with unchanged rates. This amounts to a very dovish taper.