ECB
The ECB kept interest rates steady as expected and extended its bond-buying programme to December 2017 Kai Pfaffenbach/ Reuters

The European Central Bank (ECB) extended its bond-buying programme on Thursday (8 December) until at least December 2017, in line with market expectation, as it kept interest rates unchanged at zero.

The bank also left its refinancing rate - i.e the rate at which it lends money to commercial banks - at zero and -0.4 % on deposits it takes from banks, with a view to encouraging banks to lend money rather than deposit it at the ECB.

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In a statement, the bank said its €80bn-a-month quantitative easing scheme will continue as normal until the end of March 2017, after which it would cut bond purchases to €60bn (£50.63bn) a month.

ECB President Mario Draghi said that if the eurozone economic outlook "becomes less favourable", the central bank would consider expanding the size and/or length of its bond-buying programme.

Fighting off suggestions of a fudge, or whether or not the ECB's move constituted a tapering, Draghi said, "The presence of the ECB will be on the markets for a long time. That's why tapering was not discussed."

In response the euro slid against both the dollar and the pound, changing hands at $1.0679 (-0.69%) and £0.8462 (-0.66%) at 13:38 GMT.

The bank also confirmed it would be making amendments to the rules governing its bond purchases to ensure it does not run out of German bonds to buy; the bond market where bulk of its purchasing has been focused.

To ensure this, the ECB has lowered its minimum maturity of eligible bonds to 1-year from 2-years, with the programme now also able to buy bonds that have a yield below the deposit rate of -0.4%.

Shilen Shah, bond strategist at Investec Wealth & Investment, said: "The key takeaway is the confirmation that the ECB is extending its bond buying programme past the first quarter of 2017, with the programme scheduled to end in December 2017. That said the market seems to be somewhat disappointed by the central bank's so-called slower for longer strategy, with the German 10-year yield up 8.5bps on the day and the Italian 10-year yield up 14bps."