Carsten Brzeski, Chief Economist at ING, points out that the ECB president Mario Draghi just confirmed the bank’s determination to end quantitative easing, but opened the door for a long period of low interest rates.
Key Quotes
“He confirmed the ECB’s previous take, arguing in favour of a soft patch and pointing to several one-off factors. At the same time, however, Draghi stressed that some temporary factors could become long-lasting, ie trade tensions and external uncertainty. In sum, Draghi is still betting on domestic demand, the strong labour market and investment, to support the eurozone recovery in the coming months.â€
“Turning to inflation, Draghi pointed to satisfying wage growth but emphasised that the pass-through from higher wages to higher inflation was still hardly visible and that uncertainties surrounding the medium-term outlook had increased.â€
“Against all of the above, Draghi slightly changed the well-known ECB communication. While there is still a strong determination to end the net-QE purchases by the end of the year, Draghi opened the door for changes to the forward guidance in the course of 2019.â€
“It is too early to read any real changes in the ECB’s anticipated path for monetary policy beyond the end of the net-QE purchases. However, Draghi at least just sent a clear signal of the ECB’s willingness to err on the side of caution when it comes to the first rate hike.â€