The European Central Bank has cut a key interest rate and announced an extension of its monthly asset purchases. But the euro leapt higher as financial markets signalled they'd been expecting yet more stimulus. David Pollard reports.
Euro zone waters are a bit less choppy recently. Some asking - especially in Germany - whether it needs more stimulus. The latest PMI shows business accelerating. But: the PMI prices index slipped again - the zone's feeble 0.1 per cent inflation rate still vulnerable. A perfect cue for a cut in the ECB's deposit rate cut of 10 basis points .... and more. SOUNDBITE (English) ECB PRESIDENT, MARIO DRAGHI, SAYING: "We decided to extend the asset purchase programme. The monthly purchases of €60 billion under the APP are now intended to run until the end of March 2017, or beyond, if necessary." But was it enough? With low-to-no inflation a sign of still tepid growth, ECB forecasts for price increases were revised down - slightly. Inflation now seen at 1.6 per cent in 2017 versus the previous forecast of 1.7 per cent. Growth - it was revised up fractionally. Markets initially responded send shares down - and the euro up to a two-week high. A sign that Draghi wasn't as dovish as many hoped. Though perhaps they expect too much of central banks anyway. Admiral Markets Darren Sinden. SOUNDBITE (ENGLISH) ADMIRAL MARKETS MARKET RESEARCH AND CLIENT RELATIONS MANAGER, DARREN SINDEN, SAYING: "Monetary policy alone can't solve all the problems of the euro zone. The German finance minister said as much back in October, and we will need to see the politicians make some tough decisions about making the euro zone more competitive on a global basis sooner rather than later, or we'll be stuck with the structural issues that the euro zone has, such as very high unemployment, for many years to come." Markets now brace for the Fed in just under two weeks time. An expected rate hike likely to do what Draghi couldn't at this meeting: send the euro lower. A result he's, no doubt, counting on.