Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Draghi affirms ECB will decide on tapering in the autumn

Published 07/09/2017, 14:28
Updated 07/09/2017, 14:37
© Reuters.  ECB will likely announce bulk of tapering details in October

© Reuters. ECB will likely announce bulk of tapering details in October

Investing.com – Even while the European Central Bank made no changes to either policy or its statement on Thursday, Mario Draghi, president of the euro zone monetary authority, affirmed that a decision on whether to reduce, or taper, asset purchases will be decided in autumn, most likely in October.

The ECB kept monetary policy on hold on Thursday with the main refinancing rate left unchanged at 0%, the rate on bank overnight deposits kept at -0.40%, while the rate on the marginal lending facility, or emergency overnight borrowing rate for banks, stayed at 0.25%.

The central bank also left unchanged its €60 billion ($71.8 billion) per month asset purchase program and kept its promise to run the accommodation “until the end of December 2017, or beyond, if necessary”, while also leaving the door open to a possible increase in size “if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation”.

Tapering details expected in October

However, in a repeat of the prior meeting, Draghi did promise that “this autumn we will decide on the calibration of our policy instruments beyond the end of the year.”

While the ECB chief did show caution on the future developments he admitted that “probably the bulk of these decisions will be taken in October.”

Growth forecasts revised up, inflation expectations lowered

Draghi also revealed that the ECB had increased growth projections for this year while lowering inflation forecasts for both 2018 and 2019.

Specifically, the ECB now expects 2017 growth to be 2.2%, compared to 1.9% in June, while projections for 2018 and 2019 were left unchanged at 1.8% and 1.7%, respectively.

The monetary authority left inflation forecasts for this year unchanged at 1.5%, but lowered forecasts for 2018 to 1.2% from the prior 1.3% and for 2019 to 1.5% compared to the previous 1.6%.

ECB monitoring euro volatility

Regarding the single currency, Draghi avoided mentioning the euro’s recent strength, although he did focus on moves in currency markets.

“Recent exchange rate volatility represents a source of uncertainty which requires monitoring,” Draghi stated.

While the ECB felt that risks surrounding the outlook for growth in the euro zone were “roughly balanced”, Draghi did mention currency markets as a source of downside risk.

While mentioning the “current positive cyclical momentum” as an upside risk, he said that negative issues were “primarily (related) to global factors and developments in foreign exchange markets”.

In reaction to Draghi’s remarks, the euro spiked to an intraday high of 1.2059 against the dollar. EUR/USD was last up 0.87% at 1.2020 by 9:29AM ET (13:29GMT), compared to 1.1972 ahead of the press conference.

The euro was also higher against the pound and the yen, with EUR/GBP climbing 0.43% to 0.9175 and EUR/JPY advancing 0.53% to 130.87.

Meanwhile, European stock markets traded higher. The Euro Stoxx 50 rose 0.67%, Germany's DAX gained 0.84%, France’s CAC 40 advanced 0.57%, while London’s FTSE 100 traded up 0.61%.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.