ECB meeting: From "too downbeat" to "downbeat"

ECB kept its policy rates on hold as expected. More interestingly Trichet announced that no spread will be added at the 12-month Long Term Refinancing Operation (LTRO) on 30 September. This is likely to dampen market expectations that the ECB will begin to hike rates within the next year. The staff macroeconomic projections were revised upwards, but are still downbeat. The growth forecast now looks like an L-recession. We expect that the ECB will have to revise their staff growth projections