Monetary policy

Since the financial crisis, the unwritten rule has been that bad economic news was good news for investors, as central-bank taps likely would be opened. And if a central bank talked more dovishly than expected in a meeting, the markets were quick to react and party.

Although they will only have 2-year maturities, the LTROs were already announced, so early that details are not even finalized yet. It was visibly considered necessary to send a strong message now.

Draghi essentially confessed to what everyone already knows - the European economy , after a short bout of strength in late 2017/early 2018 - is decelerating again.

Markets no longer believe in the ability of the ECB to raise its key rates in 2019 and the theme of the Japanization of Europe is coming back. A comparison with the Fed’s experience in recent years allows us to see more clearly.

At last night’s FOMC, Jerome Powell explained that "the normalization of the size of the balance sheet would be completed sooner" and that the Fed would now "evaluate the appropriate timing for the end of balance sheet reduction”. We briefly explain why below.