Mario Draghi's Guidance Surprisingly Blunt
The European Central Bank didn’t surprise on Thursday when it decided to maintain its current monetary policy for the time being.
However, at the press conference following the bank’s policy meeting, President Mario Draghi made some bold comments that helped weigh down the common currency.
The euro traded at $1.3825 at 6:45 GMT on Friday morning after losing more than 1 cent on Thursday.
The Wall Street Journal reported that Draghi was uncharacteristically direct when speaking on Thursday, which many saw as an effort to talk down the rising euro. Draghi said the bank was “comfortable with acting next time." indicating that the bank was planning to make a policy change at its June meeting.
Normally, the ECB is reluctant to make comments about policy moves ahead of its meetings, so Draghi’s bluntness was a break from the norm.
Draghi also said the bank is waiting to see staff projections which are due out in June. Most analysts expect that the projections will show even lower expectations for inflation through 2016.
The region has been battling extremely low inflation rates for the past few months, which most expect will force the ECB to make a move sooner or later. Compounding the region’s problems has been the strengthening euro, which is weighing on prices and impeding the bloc’s recovery by making exports less competitive.
Moving forward investors will be keeping a close eye on the ECB as it moves in the opposite direction of both the Fed and the Bank of England. While the Fed and the BOE are both looking at raising interest rates sometime next year, the ECB will likely be making a cut in the near term.
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