After cutting interest rates to a historic low last week, ECB President Mario Draghi suggested that there was little more that the ECB could do. As far as conventional policy is concerned, this may well be the case and we see interest rates remaining at 0.75% for the foreseeable future. While the ECB has no plans for further unconventional policy support at present, there is a chance that it will instigate full-blown QE for the region as a whole is the recession deepens and deflation risks mount. But recent signals from the Bank suggest that it will stand firm on its objections to monetary financing of individual troubled economies.
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