Unit 2 & 4: The ECB and monetary policy

There was a surprise monetary policy move by the European Central Bank (ECB) today with the announcement of extra quantitative easing, a move to buying corporate as well as government debt, together with a looser (more expansionary) interest rate policy with cuts to both the main policy rate and also the bank deposit rate.

Click here for an article explaining the reasons behind the move. 

The ECB has also introduced some conditional funding - there is more generous funding for commercial banks providing that they are lending to businesses and consumers.

Designed primarily to send a message to the markets that the ECB means business in trying to stimulate the moribund Euro Zone economy and also to bring about a depreciation of the Euro, after a few hours it seemed that the markets were calling the ECB's bluff - the Euro was appreciating in the markets although stock markets were higher.

Is this the last chance saloon for the ECB? Where next for monetary policy inside the Euro Zone?

Questions for discussion:

Will it work? (in an exam, you would argue both the case for and against)