While Draghi has so far failed to provide more context on the forward guidance of the “summer of 2019” threshold for low rates, keeping the same language as last month, as part of his prepared remarks he added a paragraph that indicates the ECB president is generally happy with the state of the European economy:
“While uncertainties are notably related to the global trade environment remain prominent, the information available since our last monetary policy meeting indicates that the Euro area economy is proceeding along a solid and broad-based growth path. The underlying strength of the economy confirms our confidence that the sustained convergence of inflation to our aim will continue in the period ahead and will be maintained even after a gradual winding down of our net asset purchases.”
Additionally, his language on trade risks was also unchaged, although Draghi did make the following somewhat downbeat comments on the Trump/Juncker deal, saying it was a “good sign [but] too early to tell”. Answering a question about the deal, Draghi said that the ECB had “taken note” but that it is “too early” to say anything about the content. and that “it’s a good sign” because there is a “willingness to discuss trade issues in a multilateral framework again.”
Draghi also said that the reinvestment of maturing bonds “wasn’t discussed.”
But what the market appears to be most focused on is Draghi’s comments on inflation: here Draghi said that “uncertainty around inflation is receding”, that “underlying cots pressures are strengthening” and “underlying inflation to rise gradually in medium term”, and finally that he sees “some encouraging signs on inflation” even if it is “too early to call victory on inflation.”
As a result, the EUR ticked up modestly, if briefly, but has since given up much of the gains as Draghi sidesteps comments on the euro:
- Draghi: Exchange Rate Isn’t A Policy Target
- Draghi: Euro Has Appreciate Considerably Over Past 12-18 Months
… while 10Y Bunds are drifting higher concerned about Draghi’s generally favorable outlook amid warnings on rising prices.
Finally, some more headlines from the conference:
Bloomberg headlines:
- DRAGHI: ECB READY TO ADJUST ALL INSTRUMENTS AS NEEDED
- DRAGHI: QE STOCK, REINVESTMENTS, GUIDANCE PROVIDE STIMULUS
- DRAGHI: SIGNIFICANT MONETARY POLICY STIMULUS STILL NEEDED
- DRAGHI: INFLATION ADJUSTMENT TO CONTINUE AFTER BOND BUYING ENDS
- DRAGHI: ECONOMY PROCEEDING ALONG SOLID, BROAD-BASED GROWTH PATH
- DRAGHI: UNCERTAINTY RELATED TO TRADE REMAIN PROMINENT
- DRAGHI: RISKS TO GROWTH OUTLOOK REMAIN BROADLY BALANCED
- DRAGHI: GROWTH IN GLOBAL DEMAND TO BOLSTER EURO-AREA EXPORTS
- DRAGHI: RISK OF HEIGHTENED MARKET VOLATILITY NEEDS MONITORING
- DRAGHI: GLOBAL UNCERTAINTY, THREAT OF PROTECTIONISM PROMINENT
- DRAGHI: DIRECT EFFECTS OF IMPLEMENTED TARIFFS LIMITED
- DRAGHI: TRADE WAR WOULD CREATE ENTIRELY DIFFERENT CLIMATE
- DRAGHI: MID-TERM OUTLOOK FOR GROWTH, PRICES UNCHANGED FROM JUNE
- DRAGHI: SOME SLUGGISHNESS FROM 1Q CARRIED INTO 2Q
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