Stefan Koopman, Market Economist at Rabobank, suggests that there was a broad agreement among the members of the Governing Council that the inflation and growth outlook had deteriorated since the meeting in December. Key Quotes “This was also backed by a sharp cut in the staff forecasts and a large drop in market-based inflation expectations. There was a broad consensus among the GC that monetary policy needed to respond to this setback. The TLTRO-IIs appeared to have the most backing, followed by the decision to add another EUR 20bn to its monthly APP purchases. To facilitate this, non-bank investment grade corporate bonds had to be added to the ECB's grocery list and some of the APP’s parameters (e.g. the ECB’s share of the purchases) had to be adjusted, but at this stage they were getting into disputed territory. There was, for instance, no mention of the capital key or the deposit rate hurdle. Even though the Governing Council seems to have ransacked its toolbox at its meeting in March, it's still not completely empty. First of all, the accounts made it explicitly clear that the GC would not rule out further cuts in policy rates if new shocks to the inflation outlook were to materialise. The 10 bps cut in the deposit rate to -0.40% is therefore by no means the final cut. However, some of the members expressed concerns that a further cut in the deposit rate could have possible adverse side effects, in terms of banks' profitability and, hence, the banking system's stability. This, in turn, signals that the ECB thinks there actually is a lower bound to negative interest rate policy. Secondly, in order to be able to fully source the bonds needed to get to the EUR 80bn/m purchase target, the ECB might still decide "to propose new parameter changes as needed". It's not entirely clear what these parameters precisely encompass, but note that there is still some "wiggle room" regarding the capital key restrictions, the issue share limits or the deposit rate purchase floor. Even though there are numerous technical, and most certainly political, issues that would arise when such changes are implemented, we can't rule them out. Draghi has proven over and over again that he's able to find a way round to this.” For more information, read our latest forex news.