Today the European Central Bank (ECB) engaged in further expansion of its monetary policy, due to downside risks to Eurozone growth given weaker global conditions.
While at initial glance it appeared that ECB President Draghi had ‘thrown the kitchen sink’ at the lack of growth/inflation with the expanded QE purchases (including the surprise non-bank IG corporates) and Long Term Refinancing Operation (LTRO) program, a press conference which raised the bar on future interest rate cuts and maintained constraints on LTRO usage took the shine off the easing package.
The ECB’s new set of growth and inflation forecasts were also released today, with decent downgrades to both growth and inflation (although largely in line with expectations). In our view, the 2018 HICP forecast of 1.6% is particularly notable given its distance from the 2% inflation target.
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