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Managing expectations can be an exercise fraught with difficulty, as last week's announcement by the ECB demonstrated all too clearly. The market regarded the outcome of December's meeting as the most disappointing for years. Could it be that Mario Draghi, who has so successfully managed the market's expectations in the past, has become a victim of his own success?
When everyone is trying to get one step ahead of everyone else, expectations are crucial. Financial markets are all about buying an asset before everyone else buys it, or selling it before everyone else sells it: in other words, expectations. Central bankers know this as well as anyone else, so they try to manage expectations. But expectations can also be mismanaged.
The European Central...
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