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Beecroft: The ECB brings out the big guns

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The ECB has brought out the big guns in an effort to combat deflation and boost growth in the Eurozone. It has announced a series of measures including a cut in the main rate and taking the bank deposit rate into negative territory for the first time.

The base rate of interest fell from 0.25 percent to 0.15 percent and the deposit rate is now minus 0.10 percent, meaning banks have to pay the European Central Bank if it wants to park its money with it. Also announced, a new round of LTROs, in order to boost bank lending.
The question many investors are now asking is – has Mario Draghi run out of tricks? Saxo Bank’s Nick Beecroft says there’s not much left in Mario Draghi’s arsenal: "They have gone as far as they absolutely could short of QE involving purchase of government securities or even private equities". But he adds we could see further "unconventional measures" such as bigger LTROs.

Mr Draghi confirmed a downgrade in GDP expectations for the 18-nation eurozone for 2014, with economic growth now forecast at just 1 percent. The euro fell to a four-month low against the dollar on the news. But Nick thinks we "may actually see a bounce in the euro", as markets will try and push the ECB on rates.