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ECB policy meeting: battle of the two Draghis

Thursday, June 08, 2017 - 01:53

The European Central Bank signalled on Thursday it planned no further interest rate cuts as euro zone prospects improved, but said subdued inflation meant it would continue to pump more stimulus into the region's economy. As David Pollard reports, the mixed message kept markets guessing, but ultimately drove the euro downwards.

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SOUNDBITE (English) MARIO DRAGHI, ECB PRESIDENT, SAYING : "We expect them to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases." Markets might see it as a battle of the two Marios. First, a more hawkish central bank chief removing a long-standing reference to a possible need for lower interest rates in his opening statement. And dropping another reference to 'downside risks' in the euro zone. Though the dovish Draghi retained one well-used mantra. SOUNDBITE (English) MARIO DRAGHI, ECB PRESIDENT, SAYING : "A very substantial degree of monetary accommodation is still needed." Even so, there was some surprise at the change in language. (SOUNDBITE) (English) PETER DIXON, GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, SAYING: "We still have Brexit to contend with...and that could have some European spill-over effects. But then there's a wider picture. There are still lots of concerns out there, lots of risks." If for the ECB right now, growth isn't one of them. The bank revising up its euro zone forecast this year from 1.8 to 1.9 per cent. Weak inflation could still be a risk. To chime with lower oil prices, that revised down this year from 1.7 per cent to 1.5 per cent. And when asked about phasing out quantitative easing in September, Draghi said: SOUNDBITE (English) MARIO DRAGHI, ECB PRESIDENT, SAYING : "It was not discussed." (SOUNDBITE) (English) VICKY PRYCE, CHIEF ECONOMIC ADVISER, CEBR, SAYING : "There is a period of improvement - and inflation, nevertheless is staying quite low. And there is no real reason why he should raise rates and he will be quite careful to see that this improvement in the economy continues." The ECB will, in fact, be 'in the market' for a long time, Draghi added. The euro at a one-week low, bond yields multi-month lows, on the meeting - as despite the more hawkish tone, the dove was seen to win the day.

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ECB policy meeting: battle of the two Draghis

Thursday, June 08, 2017 - 01:53