Draghi reloads the bazooka

The European Central Bank extended its quantitative easing programme beyond its current horizon of March 2017 on Thursday, saying it will keep buying up eurozone corporate and government debt until at least December 2017.

The bank also left its key interest unchanged on Thursday afternoon, when the bank announced the outcome of its December governing council meeting.

The bank left all its main rates unchanged, with its key refinancing rate remaining at 0% and the key deposit rate left at -0.4%.

The central bank said it expected “interest rates to remain at present or lower levels for an extended period of time.”

It would have been an enormous shock if either of those rates changed on Thursday, with the market pricing a 98% chance that rates would stay put.

Inflation has picked up a little in recent months, hitting 0.6% in November, but still sits well below the ECB’s target of close to, but not above, 2%.

In October, ECB President Mario Draghi strongly hinted that the bank would make some sort of move on a QE extension at this month’s meeting, saying that him and the rest of the governing council would have access to new forecasts and papers from ECB staff by the meeting. The bank currently has the scope to buy €80 billion per month of government and corporate bonds.

“Our decisions in December will tell you what we are going to do in the coming months. That will define the monetary policy environment for the coming weeks and coming months,” he said in his press conference on October 20.

Markets in Europe and across the world will now be waiting with bated breath to hear what Draghi says when he delivers a set of prepared remarks and then takes questions from the press at 2:30 p.m. CET (1:30 p.m. BST).

More follows…

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