Draghi drives home the advantage - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, notes that the ECB left unchanged its policy levers; continuing with its NIRP ad QE purchases that are slated at 80bn per month until March and 60bn until December.

Key Quotes

“It acknowledged the pick-up in headline inflation, but said “underlying inflation pressures remain subdued.” The statement also said, “The Governing Council will continue to look through changes in HICP inflation if judged to be transient and to have no implication for the medium-term outlook for price stability.”

“The ECB has not always considered a rise in headline inflation driven primarily by higher energy prices as transitory.  Several times in its current NIRP/QE policy easing cycle, the ECB spoke of the negative long-term impact lower energy prices appeared to have on inflation expectations, suggesting lower energy prices were a factor contributing to policy easing.  As such, the ECB is taking a relatively dovish position by its standards.”

“The statement also continues to say that the ECB could ease further if required.  It does not say that policy easing could be wound back earlier if conditions improve.  Draghi continued to call this a “high-quality problem.”  This continues to suggest that the ECB sees the bigger risk as a slower recovery in inflation towards its target, and perhaps is willing to risk inflation running above target at some point in the future.”

“The market was not looking for any policy changes or shift in the key parts of the statement at this policy meeting.  Nevertheless, economic growth and inflation have picked up or look more promising in recent months, and the risk, if anything, was that the ECB might sound less dovish.  In contrast, the ECB appears more interested at this stage of driving home the advantage of its policy easing, maintaining its vigor and helping raise inflation expectations, and lower real interest rates.”