ECB decision - Analysts react

Following Draghi’s comments and due to increased worries about the impact which negative interest rates might have on lenders’ margins and profitability, “it does seem more likely than not that Eurozone interest rates really have now reached their low [...] It does look entirely possible though that the ECB could take further QE and liquidity measures should the downside risks to Eurozone inflation deepen further or even fail to ease.” - Dr. Howard Archer, chief UK+European economist, IHS Global Insight

"The selloff in the rates market was a little more puzzling, the short end makes sense, but a long end selloff in the face of more QE was odd and hurt equities. We think equity markets will like it [...] Yes there may not be the added kicker of a weaker currency but the ECB was clear they were targeting credit creation in the domestic economy. In addition if credit spreads get driven in companies will be able to issue debt in size once more, with some of that likely to go into M&A and buybacks too. It should be positive for Financials and yield plays We think Financials are the big winners of the package, notably banks. Notwithstanding the back-up in yields the ECB is buying ever more bonds and corporate yields are likely to fall. That leaves high dividend equities as the place to be." - James Barty, Roman Carr and Tommy Ricketts, Bank of America-Merrill Lynch

Following today's increase the ECB is picking up assets at an annual rate of €960bn, or 9% of Eurozone GDP - a larger share of the country's GDP than the US Federal Reserve's QE3 at its peak. Reductions in the main refinancing operation and marginal lending facility rates and the TLTRO program are intended to narrow the gap between interest rates in the Eurozone's stronger economies and its weaker ones. - Bill Adams, senior international economist, PNC Financial Services

The Governing Council has acted boldly, delivering more stimulus than most forecasters were anticipating. Policymakers in Frankfurt appear to have realised the importance of not under-delivering again. The ECB deserves credit for learning from its mistake at the December meeting but there is no guarantee that its latest ‘bazooka’ will be any more effective than previous ones in securing string and sustained growth. Its deposit rate was cut by less than we had expected, perhaps reflecting concerns over the short-term impact on banks’ profitability. – Jonathan Loynes, chief European economist at Capital Economics

Contrary to normal operations the ECB chose to announce new measures as part of its initial announcement instead of waiting for the press conference. Attention at the conference will focus on on which private sector bonds the ECB will buy and whether it will in fact pay banks to bid for funds in the new TLTRO rounds. Draghi’s assessment of the extent to which negative interest rates are hurting banks’ earnings prospects to such an extent as to make the policy counterproductive will also be a point of focus at the press conference. – Claus Vistesen, chief Eurozone economist, Pantheon Macroeconomics

“The ECB has come out of gates drumming big beats and firing on all cylinders. It is Draghi which we have not seen before and today's decision is very like someone coming up with revenge. The big question is if this is not going to work then we have serious trouble because the ECB is going to buy the corporate bonds. So, basically what the Bank has said is that they mean business and when they say they will do everything that they can - it means they actually mean that.” – Chief market analyst, Ava Trade

"It’s hard to see even lower rates and more QE in Europe as a positive development. The fact the ECB is still pursuing such extreme monetary policy paints a depressing picture of the European economy, and markets are beginning to question what central banks have left in the locker if the global economy slips back towards recession."- Laith Khalaf, Senior Analyst, Hargreaves Lansdown

The ECB acted boldly to cut the run-rate for its asset purchase programme, although the date for it to end does not appear to have varied. A reduction in the refi rate was meant to lower the pain on banks, but there was not a willingness to take it below zero. No signal of tiering but there could be more on that in the press conference. The press conference should provide more details on just which non-bank corporations are eligible for their debt to be purchased by the ECB and the exact terms of the extra liquidity provision which has been announced. – Ken Wattret, Co-Head of European Market Economics, BNP Paribas