Draghi Puts QE Taper Question to Bed For Now

The ECB press conference was always going to be an interesting one for the markets as there was many different issues that people would want to question Mario Draghi on. While the press conference may not have brought the kind of volatility to the markets as it sometimes can, that does not mean it disappointed.

Mario Draghi put to bed the question that has arisen in the markets on whether the ECB could taper in response to the recent rise in inflation, suggesting the moves reflected their own views on the inflation outlook, just not the market view. Moreover, the ECB barely changed their forecasts for growth and inflation, only lifting the inflation forecast for this year to 0.3% from 0% and revising down growth in 2017 from 2.1% to 2%.

On Greece, Draghi gave very little away opting not to discuss the talks directly, which was expected. He did suggest that T-Bill issuance for Greece could be considered if a deal is agreed with creditors, but not before. When asked about the bundling of IMF payments, Draghi highlighted that it was done by one country in the 70’s which appears to have left the door wide open to this prospect which takes away all urgency for a deal to be done by Friday. In other words, these negotiations are likely to go on, especially considering the comments from German Finance Minister Wolfgang Schaeuble which came during the press conference, in which he claimed his first impression of Greece’s proposal confirms talks will not be over soon.

All things considered, the main takeaway from this press conference is that the ECB has no plan to taper its bond buying early, which should help to cap any significant euro rallies that appear to have been driven by yesterday’s higher inflation figures and higher bond yields.