KW: Boy, That developed quickly… Who could have seen this happening? There is more to the downside risks than ‘doing what it takes’ can handle it seems

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As we noted earlier, the bar was high for the ECB to surprise dovishly, yet it did just that moments ago when it announced (amid unchanged rates) that not only is it announcing a new series of TLTRO “starting in September 2019 and ending in March 2021, each with a maturity of two years”, but also changed its rate guidance, extending its rate guidance beyond “at least the summer of 2019” and now sees rates on hold “at least through the end of 2019.”

A few short months ago – just like Jay Powell at The Fed – everything was awesome: economy was about to reach escape velocity, inflation was picking up, QE was to be phased out and normalization could begin.

And then – the best and the brightest that Europe’s economic schools had to offer were horrified to see that their forecasts were completely wrong and the EU economy (core and periphery) began to collapse as fears of a less-than-100%-dovish-ECb would expose the zombified European banking and economic system.

…but, have no fear, Draghi is on it this time, keep rates lower for longer (crushing bank profitability even more), extend more credit to banks who are already seeing borrowing demand collapse (and encumbering more of their assets), and promise that the economy and inflation will pick up any quarter now…

Echoing the OECD’s warnings, ECB Chief Mario Draghi just admitted that its forecasts were way off and revised 2019 growth expectations “substantially” lower (from 1.7% to +1.1%) and slashed all inflation forecasts.

Headlines so far include:

• *DRAGHI: INCOMING DATA REMAINS WEAK, PARTICULARLY MANUFACTURING
• *DRAGHI SAYS RISKS TO ECONOMIC OUTLOOK STILL TILTED TO DOWNSIDE
• *DRAGHI SAYS 2019 GDP FORECAST REVISION IS ‘SUBSTANTIAL’