High equity and bond prices reflect ultra-low interest rates and the central bank liquidity splurge. The low interest rate policy has just been confirmed by the ECB, with a key rate cut of 25bp to 0.5%. The main reasons for this decision are the latest economic data showing no spring pickup, an inflation rate of 1.2% at present which will probably considerably undershoot the ECB goal this year and next, and modest growth rates in private monetary holdings despite the liquidity flood (see chart below). The overall impact of the ECB move on EMU growth will, however, be fairly muted. This follows the recent announcement by the Bank of Japan that it plans to double the monetary base by the end of 2014. If in future the Japanese central bank is going to be snapping up some two-thirds of government bond issues, close to zero interest rates on Japanese government bonds are practically guaranteed. Given the size of the Japanese bond market, this will also serve to lower global yields.