ECB President Mario Draghi said the ECB will study policy options to ensure it can pursue its unprecedented money-printing programme but did not hint at the anticipated extension of its asset purchases, maintaining the March end-date in an unexpectedly balanced message. In June, they forecast inflation of 1.3 percent for next year and 1.6 percent in 2018.
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The European Central bank is however expected to announce their decision at 1:45 p.m. Frankfurt time, Draghi will also speak to reporters 45 minutes after the announcement. The purchases, made at a rate of 80 billion euros a month, are set to continue at least through March, 2017 or until inflation convincingly picks up. “In the meantime, Draghi struggled manfully not to raise expectations of the inevitable”.
The euro gained ground after Draghi’s comments, hitting a two-week high of $US1.1326 ($A1.4817) before paring gains to trade up 0.15 per cent at $US1.1254. The yield on the 10-year Treasury note rose to 1.614% from 1.539%.
The effects have been minimal and it running out of suitable purchases so Draghi said bank experts will now look at what changes are necessary to make the programme run more smoothly. “The committees have full mandate”.
It is clear that the ECB’s bond-buying initiative isn’t working. Any extension of the European Central Bank bond programme was only hinted at, with Draghi suggesting no extra stimulus for the time being.
While stressing that policy makers didn’t discuss the possibility of extending the duration of QE, he reaffirmed the Governing Council’s “unanimous” commitment to carry out current stimulus until it sees a “sustained adjustment in the path of inflation”.
The won headed for its biggest drop in nearly two weeks after the country’s government said North Korea may have conducted a test, according to a Yonhap News report that cited an unidentified government official.
U.S. stocks fell on Thursday as the European Central Bank disappointed the market by saying it hadn’t discussed further quantitative easing at this month’s policy meeting.
The ECB slightly upgraded its euro zone growth forecast to 1.7 per cent from 1.6 per cent this year, but downgraded it to 1.6 per cent from 1.7 per cent for both 2017 and 2018. Chronically low inflation suggests the economy is not hitting on all cylinders, even though the currency union is enjoying a moderate economic upswing.
Growth in the region slowed to 0.3 per cent in the second quarter after the economy expanded 0.5 per cent in the three months through March.
European shares closed lower, with the FTSEurofirst 300 off 0.38 per cent at 1,374.26.
“We continue to expect real GDP to grow at a moderate but steady pace and euro area inflation to rise gradually over the coming months”, said the head of the European Central Bank. “The economic recovery in the euro area is expected to be dampened by subdued foreign demand, partly related to uncertainty surrounding United Kingdom referendum”.
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“Fiscal policies should also support the economic recovery”, he said, repeating a message given by central bankers at the annual Jackson Hole gathering this year but which has prompted little response so far in Europe. “However, low interest rates should not be used as the justification for everything that goes wrong with banks today”.
