Treasury Pulse

THE key theme for the week was the European Central Bank (ECB) policy meeting.

The ECB slashed its 2016 inflation forecast to 0.1% against 1.0% and projected only a slow recovery in inflation rate going forward. In response to this very weak inflation environment, the ECB cut the main refinancing rate by 5 basis points to a record low 0%. The already-negative deposit rate was cut by 10 basis points to -0.40%, and the marginal lending facility rate was reduced by 5 basis points to 0.25%. It also expanded the monthly purchases under the asset purchase programme by 20 billion euros to 80 billion euros starting in April and also announced a new series of four targeted longer-term refinancing operations. However, ECB president Mario Draghi delivered a massive counter punch, saying the bank did not expect to have to cut rates further.