The European Central Bank (ECB) outlined plans to end its massive stimulus program by the end of this year, but keep interest rates steady until next summer.
The bank said Thursday that if incoming data followed its forecasts, then its monthly bond purchase program would be extended through to the final quarter of the year, though at a lower pace. This means the program would likely end in December if the euro zone economy remained resilient.
Until now, this quantitative easing (QE) program was scheduled to last until September, carrying monthly purchases of 30 billion euros ($35 billion) of government and private debt. This will now be reduced to 15 billion euros during the last three months of 2018.
Furthermore, the ECB also indicated that a rate hike is unlikely to come before the summer of 2019, again depending on data.
"The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019 and in any case for as long as necessary," the ECB said in its statement.
Euro falls
QE is aimed at boosting lending in the region and stimulating growth, following the severe contraction seen earlier in the decade. Thursday's announcement was widely expected by market participants.
However, some market players were hoping to see the first rate hike in June of next year, and not as late as the third or even fourth quarter of next year. As a result, the euro moved lower against the dollar.
Nonetheless, ECB President Mario Draghi made it clear that all upcoming decisions would be determined by data. He told reporters in Riga, Latvia, that "the Governing Council concluded after a careful review that progress towards a sustained adjustment in inflation has been substantial so far."
Commenting on the ECB's move, Carsten Brzeski, chief economist at ING, said: "Today's decision is a truly Solomonic compromise between the hawks and the doves. The hawks finally got their end-date for QE, while the doves still have their open door for more if needed. Nicely done."
Inflation expectations impacted by oil prices
The ECB also published new economic forecasts Thursday. Inflation was revised upwards for this year and the next, due to higher oil prices. Annual headline inflation is expected to reach 1.7 percent in 2018, 2019 and 2020.
In terms of growth, the ECB forecasts a rise in gross domestic product (GDP) of 2.1 percent this year, 1.9 percent in 2019 and 1.7 percent in 2020.
Market players had described this month's meeting as being "live," following remarks by the central bank's chief economist that the ECB would start preparing to end its stimulus. ECB's Peter Praet said last week the bank would be discussing how to unwind its asset purchase program — which was implemented in 2015 to revamp the euro economy in the wake of the 2011 sovereign debt crisis.
Germany's ECB representative, Jens Weidmann, also said last week that he expects the trillion-euro program to come to an end before the end of this year.
David Zahn, the head of European fixed income at investment firm Franklin Templeton, told CNBC's "Squawk Box Europe" Friday that the ECB had "spent 2.5 trillion (euros) to do QE, and they want to make sure they don't exit too quickly and kinda end up wasting over 2 trillion euros."
The ECB has been under renewed scrutiny over the last few weeks. Some analysts and officials have suggested that stronger economic data in the region requires a tighter attitude towards monetary policy. The new anti-establishment government in Italy has also voiced some criticisms of the central bank.
Members from the new government accused the ECB of market manipulation by buying more German bonds in May and less Italian debt. Experts told CNBC that there were technical reasons that justified such purchases last month.