The ECB held its fire today but Mario Draghi did not disappoint. Be prepared for more stimulus in December, the ECB president said, adding that all the options would be on the table.
After a question from the FT's Claire Jones, Draghi said the ECB was ready to cut the deposit rate further. This move will generate some debate, as Draghi had previously ruled out any more trims.
But for now markets seemed to like what they saw. The euro fell sharply, European equity rallied and yields on peripheral bonds also went down. As he prepares for December, Mr Draghi has something to smile about.
We will now close the liveblog, from Emily and myself goodbye.
Here's a market round-up from Elaine Moore. The market rally is holding up as the press conference comes to an end.
Prices are starting to even out in bonds, but the drop has left 10 year German bond yields at 0.52 per cent, down from 0.57 an hour ago.
Political uncertainty means Portugal has been largely excluded from today's rally and Greece has been left out in the cold too.
But there has been a lot of movement in Italian and Spanish bonds. Investors seem to think Mario Draghi has gone beyond expectations by setting the stage for an announcement of further QE this year.
More on that deposit rate U-turn from Frederick Ducrozet, an ECB-watcher
Final question is back on Malta and its reforms, but there is no doubt that for traders the standout point from the press conference is the prospect of more stimulus, perhaps as early as December.
An update on our colleagues at FastFT:
Scores on the doors:
The euro is now down by over 1 per cent at $1.1210.
Italian 10-year bond yields are down by 7.5 basis points (or 0.075 percentage points if you prefer) to 1.527 per cent. Yields fall when prices rise.)
German 10-year yields are down by 4 basis points to 0.528 per cent.
Note that yields in the UK and US are not behaving the same way (yet); this is a pure play on what the market thinks the ECB is putting on its shopping list.
Draghi asked about the migrant crisis. He says it is a boost in labour supply but will require further investment in education. There are questions over how this investment will be financed. Too early to have full visibility on this phenomenon and the consequences on the ECB's monetary policy decisions.
Draghi asked about Volkswagen and its impact on the eurozone economy. He says it is very early to say. There will be a time when we will have the ability to make a fuller assessment.
Again a no comment - on the Chinese premier's visit to the UK this time. "These are political questions" he says.
China is a "very significant partner to Euroarea" is as far as he will go
Draghi asked about the possible political uncertainty in Spain and Portugal and whether this can have effects on structural reforms. Draghi says he cannot comment. Political uncertainty is part of democracy.
"We may well change the size, composition and design of our monetary instruments," Draghi says.
Economists are not completely persuaded by those comments over why the ECB has changed its mind over whether it can cut the deposit rate further. Fausto Panunzi at Bocconi University, says Draghi has struggled with that passage (tweet in Italian)
We are back on to one of Draghi's favourite topic: structural reforms in the Eurozone. Will QE be able to fulfil its potential without reforms?
"Structural reforms will transform what is a cyclical recovery... into a structural recovery later on" he says.
But adds that QE will still yield results.
"There are no doubts whatsoever about the effectiveness of our monetary policy regardless of whether structural reforms are implemented or not"
He adds that quite a few reforms have been implemented.
Few members of the governing council hinted at the possibility of acting today Draghi says, but not a prevailing theme of our discussion today.
Draghi says all options were considered. As for a further cut on the deposit rate, the ECB president seeks to explain how his words today chime with previous comments that they could not cut the rate further. He says that things have changed now compared to the past.
Draghi asked about the "open discussion" in the governing council over the next steps for the ECB. Are there specific oppositions? Was there a discussion over whether to act today?
This from FastFT
The US Treasury is postponing a Treasury bond auction due to the looming debt ceiling, underscoring the dangers of an accidental financial and economic disaster as Congress stalls on approving a hike to the $18tn limit, writes Robin Wigglesworth.
The Treasury was scheduled to auction two-year Treasuries on Oct 27, but due to the debt ceiling – which the authorities reckon it will hit on Nov 3 – there is a risk that it will not be able to settle the auction on November 2. In a statement it said:
Treasury has limited borrowing authority available, and cash and nonmarketable debt forecasts are extremely volatile… The current debt limit impasse is also now adversely affecting the operation of government financing, increasing federal government borrowing costs, reducing the Treasury bill supply, and increasing the operational risk associated with holding a lower cash balance.
More at FastFT
Elsewhere... some news from the US:
Yields in Europe's short-dated bond market are dropping to record lows, says Elaine Moore. The yield on 2 year German bonds is now minus 0.32 per cent. Stocks are happy too. The EuroStoxx 50 index of blue chip European companies is up 1.2 per cent on the day. Markets are liking what they hear...
Now onto the risks to the eurozone if growth in China slows further.
Draghi speaks for a while about different transitions mechanisms, but points out that direct trade exposure is "not exceptional". Even in Germany only around 10%. Equally not much indirect exposure.
But, adds the other question is about confidence - and so far there has been little impact - stressing that the IMF is still expecting growth in China of about 6%.
Howard Archer of IHS Global Insight is impressed by how much Draghi has managed to move the euro today
Traders and central bank watchers are now bracing themselves for a busier than expected December:
Draghi asks the governor of the Maltese central bank to respond. He says Malta has gone through substantial transformation but also benefited from QE via the lower exchange rate. Also government deficit has come down, giving the economy more space to expand.
If you ever doubted that Draghi's words could move markets...
Draghi's comments seem to have taken some investors by surprise, writes Elaine Moore. Prior to the press conference there was subdued talk of market disappointment and the likelihood that the ECB would avoid saying anything concrete. Mario Draghi's signal that the existing QE programme may be reviewed in December is sending prices for bonds flying while the euro has dropped to $1.12 against the US dollar for the first time since the first week of October.
Draghi is asked what the ECB can learn from the Maltese economy...
"We stand ready to adjust our design of our asset purchase programme" Draghi adds. Again reinforcing the message that the ECB is ready to do more - if needed.
When we are at zero nominal rates, real rates are being driven by expectations, Draghi says.
That's a reason for considering non-standard measures he says.
"We are thinking about it" Draghi repeats about the option of a lower deposit rate, stressing it was an "open discussion" and nothing has been decided.
Nick Kounis of ABN Amro sums up the reasons behind some excitement among analysts.
So we are back to Draghi, and the key question of whether the deposit rate could be lower - and how does this chime with his previous statement that rates were already at the lower bound?
Draghi's introductory statement is online
The Greek Analyst offers his interpretation of what Draghi may have in mind at the moment...
"To fight low inflation does not mean we want high inflation", Draghi says.
Expect the market to get excited by that Draghi comment on the deposit rate.
Further lowering of deposit facility rate was discussed, Mario Draghi says.
Barclays expects more QE to be announced before the end of the year - possibly including some more assets into the mix and an extension to the end point by six or nine months, reports Elaine Moore.
The outlook for inflation is basically stable, Draghi says.
Short-term inflation expectations declined, but then recovered. But the ECB sees downside risks from a continuously high output gap, a possible renewed fall in oil prices and a high degree of correlation between headline inflation and medium-term inflation expectations, meaning that oil prices are affecting inflation expectations.
This could lead to a de-anchoring of inflation expectations. Risks have not materialised yet, the ECB president says, but the central bank must stay vigilant.
Draghi says he believes the recovery is continuing at the same pace as it was expected earlier on this year. He adds the domestic recovery is showing resilience thanks to lower oil prices and lower headwinds from fiscal policy. However, there are weaknesses from external demand because of problems in emerging markets and China.
Draghi now talks about monetary policy and says the ECB is open to a whole set of new instruments. The ECB looking at pros and cons of different instruments. He says the governing council was not in "wait and see" mode but "work and assess"
Draghi reads the statement again saying that monetary policy can help to support the recovery, but the eurozone needs to address its structural problems. He refers to persistently high unemployment before the crisis. Alas, he skips making any reference to Matteo Renzi's expansionary budget.
Draghi has just been asked about the Italian budget. This could get spicy...
Draghi says monetary policy cannot boost the eurozone on its own. He calls for more structural reforms to lift long-term growth and raise expectations of permanently higher income. Fiscal policy should support the recovery while remaining consistent with fiscal rules.
The ECB president insists the programme of quantitative easing may well go on beyond its September 2016 endpoint. No surprise there, but will certainly boost expectations that the ECB stands ready to ease more.
No surprise from the ECB today. The ECB is ready to act, but any further easing will only come in December.
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