Indeed, Nancy Curtin, Close Brothers Asset Management CIO, summed up the feeling well saying: “The combination of a rate cut, corporate bond buying, and upping the ante on asset purchases went a lot further than expected, although markets would clearly have appreciated a greater commitment to further interest rate cuts from Draghi.”
If markets were unsatisfied by a package that included not only a five basis point cut to the main refinancing operations (bringing it to 0%) and the widely expected 10 basis point cut to the deposit facility to -0.4%, but also an expansion to the ECB’s monthly asset purchase programme to €80bn (£62bn, $88.2bn) starting in April, a widening of the list of eligible assets to include non-bank investment grade euro-denominated bonds and a new series of four targeted longer-term refinancing operations (TLTRO II)…
The question has to be asked: will ECB President Mario ‘Super Mario’ Draghi ever be able to do enough?
The problem is that increasingly, markets are concerned by the sheer magnitude of the numbers involved, both in terms of the massive injections of debt from the ECB and the relatively small growth that has come as a result of it.
"Markets are concerned by the sheer magnitude of the numbers involved, both in terms of the massive injections of debt from the ECB and the relatively small growth that has come as a result of it."
Indeed, the level of debt involved means that leaving things to unwind from here is pretty much an untenable option.
As Draghi pointed out: “I said last time that we won’t give up in our fight to get inflation back. Suppose we did give up and we got deflation, one of the most important negative effects of deflation is to increase the real weight of debt, so to this extent the expansionary measures are a very positive.”