Draghi has kept the bazooka in his back pocket for the timebeing.
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President Mario Draghi admitted the European Central Bank had not discussed expanding the asset purchase programme but reiterated that it would “act by using all the instruments available within our mandate” if warranted.
September 9 (BusinessDesk) – The New Zealand dollar retreated from a 16-month high as some traders deemed it had risen too far, too fast, and after the European Central Bank disappointed the market by not flagging any additional easing measures. “Ultimately we’ve got to be patient”, Draghi said. “Looking ahead we continue to expect the economic recovery to proceed at a steady rate”, he added. The three rates were previously lowered in March. Some analysts thought the bank might commit to a longer program. Draghi clearly does not share those concerns, quickly brushing away the question.
After a mixed bag of data over the past month in Europe, including poor German industrial orders this week, many market participants had speculated the European Central Bank might take additional actions in order to stimulate Euro Zone growth.
Prior to the press conference, Draghi’s comments on this subject were hotly anticipated, however early in the conference he poured water on the possibility.
“There was expectation from some that we’ll see an extension of the asset purchase program, that’s the disappointment in the market right now”, said Larry Milstein, managing director of government-debt trading at R.W. Pressprich & Co.in NY.
“For the time being, the changes are not substantial enough to warrant a change in policy”, Draghi said.
The ECB has not discussed the introduction of helicopter money, the former Bank of Italy governor reaffirmed.
This seems quite freaky given they have lowered their inflation forecasts for 2017 to 1.2% and, while this is a mere rounding issue from its June forecast of 1.3%, it simply pulls it further and further from their inflation mandate.
Euro area GDP was up by 0.3 per cent quarter-on-quarter in the second quarter and incoming data points to ongoing growth in the third quarter, Draghi said. Growth projections for 2017 and 2018 offset the 2016 gains cutting the numbers to 1.6% from 1.7% previously in both years.
The bank left that earliest end date unchanged.
Sentiment remains bearish towards the Eurozone and today’s inaction may spark further questions over the central bank’s ability to jumpstart Eurozone growth. He is likely to be quizzed on how close the bank came to extending the duration of its bond-buying stimulus program. Though some had already expected a six month extension on Thursday, such a move is fully priced in by the end of the year.
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The central bank’s situation contrasts with that of the U.S. Federal Reserve, which is weighing withdrawing stimulus by raising interest rate as the U.S. economy recovers more strongly. USA crude rose 2 percent, and energy companies traded higher.
