Helicopter Draghi!

Mario Draghi left the pea shooter at home and arrived with a bazooka at the European Central Bank’s monthly meeting on Thursday, delivering more monetary stimulus than what was expected. He cut the deposit rate further into negative territory (from -0.3% to -0.4%), he expanded the amount of monthly asset purchases to €80bn from €60bn (allowing for the inclusion of non-bank corporate debt purchases) and launched a new 4 year lending program that aims to promote credit extension to the economy. This unprecedented round of monetary stimulus finally did justice to his commitment from 2012 that the European Central Bank will do what it takes to reflate the European economy and prevent it from spiraling into a deflationary environment. It was only President Draghi’s forward  guidance  that  poured  cold water  over  further  rate  cut  expectations  that  disappointed  market participants, causing the euro to strengthen again.

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