Draghi's last throw of the dice

IN 2012, the president of the European Central Bank (ECB) Mario Draghi famously announced that he would do "whatever it takes" to save the euro. Finally, he has done the long-expected needful. After years of dithering, politicking and back-room bargaining in the eurozone's corridors of power, the ECB has at last joined the QE party in earnest, following gingerly in the footsteps of the US Federal Reserve, the Bank of England and the Bank of Japan.

On Thursday, Mr Draghi announced that the ECB will purchase 60 billion euros (S$91 billion) per month of public and private sector bonds starting from March, through to at least September 2016, or as he put it "until we see a sustained adjustment in the path of inflation", which the ECB targets at 2 per cent. This makes it a 1.1 trillion euro programme.

Will it work? One positive surprise - the only real surprise - is that the ECB programme is about twice as large as the markets were led to expect. This might help partially compensate for the fact that the ECB is late to the QE party. Late is better than never, but is less effective than early. This is because bond yields in the eurozone have already fallen in anticipation of the ECB's decision. They might fall some more, but their room to fall is limited.