The European Central Bank (ECB) has announced that it will phase out its massive bond-buying programme that has for the past years supported the eurozone economy. The ECB plans to end the programme by the end of this year.

Despite signs that the single currency area is going through a soft patch at a time of rising protection risks, the ECB said it would wind down its bond purchases over the next six months. The ECB is currently boosting the eurozone money supply by buying €30 billion worth of bonds each month, but this will be tapered to a monthly €15 billion after September and brought to a halt at the end of 2018.

In the meantime, German investor confidence dropped to its lowest level since 2012 as US trade tariffs and political turmoil in Italy added to worries that Europe’s largest economy is weakening.

The ZEW Centre for European Economic Research said that its index of investor expectations fell to -16.1 in June from -8.2 in May, marking the fourth monthly decline this year. Economists had predicted a drop to -14. A negative reading means that more of the investors surveyed saw a worsening of the outlook than those who forecasted an improvement.

This latest data come on the heels of a series of downbeat indicators. Still, the Bundesbank, the country’s central bank, has expressed confidence that growth will recover as temporary effects wear off.

Finally in the US, the Federal Reserve (Fed) raised interest rates by 25 basis points last week and signalled that two additional increases this year are on the way. Officials expressed confidence that the US economy is strong enough for borrowing costs to rise without hampering economic growth. At a news conference, Fed chairman Jerome Powell said the economy had strengthened significantly since the 2008 financial crisis and was approaching a “normal” level.

Last week’s rate increase is the second this year and the seventh since the end of the Great Recession. The Fed’s benchmark interest rate now stands at a range of 1.75 to two per cent.

This report was compiled by Bank of Valletta for general information purposes only.