While it’s a favourite game of every punter who’s not paid to make predictions to trash the track record of those who are, just about everyone who follows the European Central Bank was stunned by the timing of its decision to cut rates on Thursday.
In the days beforehand, a handful of forecasters began speculating after news of a collapse in inflation that the ECB might fire what could be their last shot on standard monetary policy using interest rates in a long time.
But the vast majority were caught off guard by the ECB’s refinancing rate cut to a record low of 0.25 percent. Even those who thought it might do so didn’t think it would until December. The quick, violent fall in the euro showed it.
The most puzzling bit is that this “surprise” move – as it is billed by nearly everyone writing about it – came only months after President Mario Draghi joined other central bank colleagues in announcing “forward guidance.”
That is a policy (which rather suspiciously was drawn up in haste after there was hardly anything in the way of interest rates left to cut) that surely has droves more people scratching their heads about what the point of it is now.