Draghi Does Nothing and Talks about It

marctomarket.com / by Marc Chandler / April 27, 2017

As widely expected, the ECB left its key rates and asset purchase plan intact.  It reiterated its forward guidance that rates will remain at present levels or lower.

Draghi was more confident about the economy, suggesting that the downside risks had further diminished.  They are more closely to balanced, which sets up the potential for additional adjustment at the next meeting.  Some members apparently saw the risks balanced.  In the past, the ECB characterized growth as uneven and fragile.  Now he says it is solid and broad.  However, Draghi was still disappointed by the lack of structural reform.  The main downside risks emanate from the global situation, which is a new condition.

On prices, Draghi was less sanguine.  The ECB, he says, needs to look through short-run developments and recognize that there is still no convincing sign of a sustained upward trend in prices.   Headline inflation may hover near current levels through the end of the year, Draghi said.  Draghi suggested there was more agreement about inflation than growth risks.    He identified wage growth and tentative signs of pipeline price pressures from low levels, but the outlook, especially wages, is uncertain.

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