The ECB ready for additional easing

• GDP and inflation projections were cut 
• Renewed risks were emphasised 
• The ECB is ready to do more, if needed

September ECB meeting was much expected after August’s turbulence on financial markets. There was no change in policy but the very dovish tone adopted by M.Draghi opened the door to additional easing in the coming months. The ECB presented its updated macroeconomic projections and, as expected, activity and inflation forecasts were cut. Consumer prices growth was revised down to 0.1% this year and 1.1% next year from, respectively, 0.3% and 1.5% in the previous ECB staff projections.

Despite the revisions downside risks were also underlined, M. Draghi stressing the fact that assumptions behind the updated ECB forecast were based on information available until mid-August and therefore did not take into account the most recent developments in oil prices and exchange rates. Even though the Governing Council judged premature to conclude on whether these developments could have a lasting impact on the medium-term outlook for prices, it emphasised its willingness and ability to act, if necessary. Special attention was drawn to the flexibility of the QE programme in terms of size, composition and duration. As the Governing Council decided to increase the issue share limit (from 25% to 33%), M.Draghi described it as a sign of the ECB’s readiness to use the flexibility of the programme.