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. Likewise extending the time-contingent forward guidance to December 2019 was a meaningful action. But Mario Draghi recognizes that, after downward revisions to growth estimates, risks remain to the downside, without even recognizing domestic factors in the process.
The anticipations are equally bearish for inflation, with expectations for 2021 CPI at 1.6%, which is now below the level when QE started!
By its own admission, the ECB is acting but staying behind the curve, thereby sending a loud message to bond investors to buy duration.
