ECB may extend time limit of asset purchase program during September meeting

The European Central Bank is keeping a close watch on the possible effect of the Brexit vote, which according to the ECB has raised risks on the downside to the euro zone economy. The central bank is also worried about weakness in parts of the banking sector that might hamper its policy measures’ effectiveness that are aimed at rebounding growth and inflation.

However, the central bank has stated that the rebound of the economic growth appears to remain on track. The ECB’s economic growth and inflation projections published in June might be downwardly revised during its September meeting. However, the central bank is expected to lower projection just marginally, said Lloyds Bank in a research report.

Therefore, the European Central Bank, at the current stage, is expected to concentrate on executing existing policy measures and is expected to keep policy rates unchanged. However, there is likelihood that the central bank might extend the time limit of its asset buying program by additional six months during its September meeting.

“Given concerns about the transmission of its policy, it may also adopt further measures to facilitate credit growth”, added Lloyds Bank.