ECB rate cut was a welcome surprise, says Threadneedle’s Harvey
However, Draghi’s comments at the press conference were arguably more important, according to Martin Harvey, fixed income fund manager at Threadneedle Investments.
Yesterday’s rate cut was a welcome surprise from the ECB, and the unexpected nature of the move was clearly intended for full impact on market prices. However, Draghi’s comments at the press conference were arguably more important, as questions focussed on what moves could come next.
Although the threat of negative rates remains, there was certainly no evident urgency to follow up with unconventional policies in the short-term. A new LTRO is difficult to justify at this point, and asset purchases are still too controversial to be considered.
Although Draghi was at pains to point out that the ECB possesses an arsenal of tools to address unacceptably low inflation, the lack of urgency meant the market reaction was decidedly more lukewarm than it could have been.