In a statement issued by the ECB, it was announced that the deposit rate would be decreased by 10 basis points to -0.30 per cent as of 9 December 2015.
AMP Capital chief economist Shane Oliver said there was “disappointment that the ECB did not ease more”.
Mr Oliver noted that most share markets, particularly the eurozone, fell as a result.
“The problem is that largely due to ultra-dovish comments by ECB president Mario Draghi over the last few months, markets were expecting more and this explains the negative reaction seen in share markets, the rise in bond yields and the bounce back in the value of the euro.
“As a result Draghi has arguably lost a bit of credibility in the short term,” he said.
The euro increased against the US dollar following the announcement, up from $1.06 to $1.09, according to The Economist.
However, Mr Oliver said the initial reaction has been “overly negative” and is likely to subside in coming months.
“In fact, with Draghi known to look at share markets closely (he said a few years ago it was the first stat he looks at in the morning) and the value of the euro he is likely to have been disappointed by the initial 3.6 per cent fall in eurozone shares and the 3.0 per cent gain in the euro and is likely to push back with dovish commentary in the period ahead.”
Mr Oliver also said that the ECB’s “more muted” easing has taken some pressure off the US Federal Reserve by lowering the value of the US dollar, which may subtract pressure on emerging markets and commodity prices.
In reference to eurozone economic data, unemployment fell in October – but it is still at a high of 10.7 per cent, said Mr Oliver.
Core inflation still remains low, sitting at 0.9 per cent year-on-year in November, supporting the case for additional monetary easing.
In addition to cutting the cash rate, the ECB extended its €60/month bond-buying program by another six months out to March 2017, Mr Oliver said.
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