Mario Draghi, President of the European Central Bank (ECB), today has unleashed the central banks latest wave of efforts to revive inflation and underpin the Eurozone’s economic upturn.

Firstly, in an effort to increase credit supply and lending, he has reduced the interest rate payable on cash parked by banks overnight with the ECB to -0.4% from the previous level of -0.3%. He also announced that there will be a further round of loans available to banks for them to then lend out. The benchmark interest rate was also lowered to 0%. Following the moves Draghi suggested that they don’t feel it “will be necessary to reduce rates further”.

With regard to quantitative easing, QE, the central bank is to increase its monthly purchase of bonds from 60 billion euros to 80 billion euros. Purchases of investment grade corporate bonds from non-financial companies, rather than just government bonds, will also be possible.

At the same time however the ECB significantly reduced its economic outlook for the region due to weakening global prospects. Economic growth for 2016 was revised down to 1.4% from the previous estimate of 1.7%. Growth in 2017 meanwhile was revised down to 1.7% from 1.9%. Inflation forecasts were also significantly reduced, with inflation of only 0.1% forecast for 2016 compared to the previous estimate of 1%. This is then expected to rise to 1.3% in 2017.

The news initially had a positive effect on equity markets. The revision to growth forecasts however appear to have dampened sentiment and at the time of writing the EStoxx 50 is down just over 1.5%. This has sent other indices lower, with the FTSE 100 down 1.78% at the time of writing. European government bond markets have reacted positively, with yields falling/prices rising across most of the region.