The European Central Bank catches financial markets off-guard by announcing it will extend its QE programme until the end of 2017 but also trim its asset buys from 80 billion to 60 billion euros a month. David Pollard reports.
It was a nervous wait for markets. Most bet the ECB would extend its asset purchases beyond a March cut-off. But bond yields edging higher nevertheless on the off-chance it wouldn't. In the end, it was a bit of both. QE extended yes - but at 60 billion euros per month, not 80 as before. Until December 2017 - or beyond if necessary ..... SOUNDBITE (English) MARIO DRAGHI, ECB PRESIDENT, SAYING: "If, in the meantime, the outlook becomes less favourable ... the Governing Council intends to increase the programme in terms of size and or duration." The growth and inflation outlook remain, in his words, 'broadly unchanged'. But the risks to growth are still tilted to the downside - the ECB also widening the scope of the QE programme. Bonds yielding less than the ECB's deposit rate - currently minus 0.4 per cent - become eligible. And, said Draghi, it won't be wound down just yet. SOUNDBITE (English) MARIO DRAGHI, ECB PRESIDENT, SAYING: "There is no question about tapering. Tapering has not been discussed today." SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "The recovery that we see in the euro zone is still moderate, that inflation remains below the ECB target and of course there is over the course of the present towards the end of next year a fair amount of political risk coming on the agenda. This isn't an environment where Draghi wants to layer on the uncertainties." Draghi wasn't expansive on uncertainties like Italy and its banks - or upcoming elections in France, Germany and Holland. But this meeting very much a bid to smooth the risks - of an increasingly critical time for the euro zone.