The bank will also start buying municipal debt but keep its overall asset purchases unchanged, potentially lowering its government bond buys as the new instrument crowds out other assets.
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The euro gained nearly 1.7 percent against the pound on the day, its biggest rise in over seven years.
Market expectations were hyped by repeated affirmations from ECB President Mario Draghi and fellow Governing Council members since the October 22 policy session that the bank was ready to do everything to bring euro area inflation to its target of “below, but close to 2 percent”. “Our asset purchase program is flexible, it can always be adjusted”.
Belgium’s central bank governor also expressed strong confidence in the measures announced on Thursday and dismissed concerns about the market’s negative reaction.
Investors were left somewhat underwhelmed by Mario Draghi’s reaffirmed commitment to extend monetary easing until March 2017 “or beyond” with no clearer sign of this than yesterday’s sharp recovery in the euro.
Mr Draghi described the steps as a recalibration of the ECB’s stimulus programme, which he said had been a success since it began in March.
NEW YORK, Dec (Shanghai: 600875.SS – news) 4 (Reuters) – The U.S. dollar was almost flat against the euro on Friday despite stronger-than-expected U.S. monthly jobs data, as markets continued to digest Thursday’s unexpectedly small stimulus from the European Central Bank. “We are doing more because it works, not because it fails”, he said.
“The market expected some actions that were not forthcoming”, she told a congressional hearing in Washington. The region is facing significant headwinds from low inflation and central bankers would be wise to hold back some ammo for their arsenal in case Eurozone growth slips further.
“It’s been a bit of a shocking week, really, for sterling”, said Altana Hard Currency Fund manager Ian Gunner, pointing out that the euro had already gained against the pound before the ECB’s policy decision, breaking through some key technical levels. Clues on the likely timing of any policy tightening will come next week, when the BoE’s monetary policy committee meets. Dow and S&P 500 futures were both up 0.2 percent.
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There had been expectations bond purchases would be extended beyond September 2016, he said. “If we take this as a reasonable amount of bonds, this would be reinvestment worth less than 60 billion euros”.
