ECB’s programme is here to stay

The paradox of the ECB long-term refinancing operationsEuropean Central Bank's president Mario Draghi

There was a consensus in the market that the ECB will announce an extension of its current asset-purchase programme and so president Mario Draghi did by expanding QE more than expected to December 2017 and to 2.3 billion euros . He also committed to do it even longer if needed.”The presence of the ECB on markets will be there for a long time,” he explained.

However Draghi surprised the markets by reducing its bond buying program to 60 billion euros a month from 80 billion and including some technical amendments by loosening restrictions for eligible assets.

It is well known from the US experience that QE programmes lose their influence and yields rise long before the central bank actually stops buying. So, in order to keep yields down, the ECB announced that extension of the programme by at least six months.