Draghi Says ECB Has “Considerable Headroom” To Act, Trump Responds

The euro came under heavy selling pressure yesterday in response to fresh dovish comments from ECB president Draghi.

Draghi spoke at the ECB’s Sintra conference in Portugal. During his speech, he gave the market a very clear signal that the ECB intends to ease further ahead of his term ending in four months.

Fresh Stimulus Signals

Draghi explained that if inflation fails to make it back to the ECB’s 2% target in the near term, it could warrant additional stimulus. Draghi stated:

“In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required. That aim is symmetric, which means that, if we are to deliver that value of inflation in the medium term, inflation has to be above that level at some time in the future.”

Draghi Notes Ample Room To Act

The ECB chief was also keen to note that the ECB has “considerable headroom” for additional asset purchases. He went on to affirm that “further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools”.

Commenting on the situation further, Draghi said:

We will use all the flexibility within our mandate to fulfil our mandate – and we will do so again to answer any challenges to price stability in the future.”

Inflation Falling in Eurozone

Draghi’s comments come on the back of the latest data for the eurozone. This showed inflation falling to just 1.2% in May, down from the prior 1.7% in April. Alongside this, a key indicator showed long term market inflation expectations falling to 1.135% as of Friday, its lowest ever reading.

Draghi’s verbal intervention has so far been successful in boosting inflation expectations and weakening the euro. This comes after an unconvincing statement from the ECB at its last meeting which failed to reassure investors.

The prospect of further, multi-pronged stimulus from the ECB has had a powerful effect on EUR sentiment which has not gone unnoticed by other countries.

1 2
View single page >> |

Disclaimer: Orbex LIMITED is a fully licensed and Regulated Cyprus Investment Firm (CIF) governed and supervised by the Cyprus Securities and Exchange Commission (CySEC) (License Number 124/10). ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.