Research Team at Investec, notes that the ECB yesterday fired its monetary policy bazooka as had been expected by many. Key Quotes “The fresh package of monetary stimulus measures in the light of disappointing data on activity and inflation, followed a number of easing hints from various ECB officials and a downgrading of staff GDP and inflation projections. As expected, the deposit rate was brought down by a further 10bps to -0.40%. However a surprise was a 5bp cut in both the main refinancing (refi) and marginal lending rates to 0.00% and 0.25%, respectively. Secondly, the monthly pace of asset purchases (QE) will be expanded by €20bn to €80bn. The Governing Council continues to intend the programme to run until at least March 2017. In addition, Investment grade non-bank corporate euro denominated bonds will be included in the list of assets which the ECB may buy. Thirdly, the ECB will conduct four further long-term liquidity operations (Targeted Longer-Term Refinancing Operations 2, TLTRO II). These will begin in June 2016. Finally, President Draghi added that interest rates would remain at present or lower levels for ‘an extended period of time, and well past the horizon of our net asset purchases'. The Euro dropped a cent against the Dollar. Then came the bazooka backblast. ECB President Draghi hinted during his press conference that rates may have hit the bottom. Indeed he explained that another reason for avoiding a tiered deposit rate structure, was so not to signal that rates could go as low as the ECB wanted. As the Investec Economists pointed out "To us this is the worst of both worlds – taking the deposit rate further below zero but with verbal interventions unwinding positive market effects." For more information, read our latest forex news.