After the Fed surprised everyone by not tapering QE in September, it was the ECB's turn today to confound monetary policy expectations.

The central bank cut its repo and marginal rates by 25bps to 0.25%, a move that many had predicted but not as soon as November. Falling inflation - now at 0.7% - is clearly a concern for Mario Draghi and his fellow governors, and this was probably the main reason why the ECB chose to act now.

Draghi's approach is more aggressive than his predecessor Jean-Claude Trichet, and the markets have naturally warmed to his stance. The Markit iTraxx Europe tightened 4.5bps to 80bps shortly after the announcement, the tightest level for about three and a half years. Banks outperformed, though the movements were nothing out of the ordinary.

The rally, though, lost momentum as the afternoon wore on, and the by the end of the day the Markit iTraxx Europe had given up 2bps and was trading at 82bps.

Draghi's post-decision press conference may be partly responsible for the reversal. He made it quite clear that rates would stay low for longer - "forward guidance" was mentioned frequently. Draghi also said that the main refinancing operations would be offered until July 2015.

All welcome news for risk assets, but the ECB disappointed many by not announcing another longterm refinancing operation, as the first wave of three-year LTROs are due to be repaid in the coming months. Draghi's comments suggested that it wasn't seriously discussed, and along with negative deposit rates and QE - both long-shots at this stage - LTROs are being kept in reserve as ammunition.

A strong quarterly US GDP figure may also have dampened enthusiasm. The US economy grew at an annualised rate of 2.8% in the third-quarter, considerably more than the 2% consensus estimate. This may have caused some to bring forward their timetable for QE tapering, but beyond the headline figure, the report was relatively weak, with inventory build-up making a big contribution to the 2.8% figure.

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