A dovish Draghi: underlying price pressures remain subdued - Danske
|According to analysts from Danske Bank the European Central Bank will continue its QE program in 2018, taking into account that inflation on average will remain below 1.0%.
Key Quotes:
"The ECB kept all policy measures unchanged at today’s meeting, in line with expectations. The ECB still expects rates ‘to remain at present or lower levels for an extended period of time and well past the horizon of our net asset purchases’. Regarding QE purchases, it still intends to continue these ‘until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim’.”
“President Mario Draghi’s main focus during the press conference was that the underlying price pressures remain subdued. In the introductory statement, the ECB concluded that the marked rise in inflation in December reflected mainly a strong increase in energy inflation. Related to this, the ECB concluded that it ‘will continue to look through changes in HICP inflation if judged to be transient and to have no implication for the medium-term outlook for price stability’.”
“During the Q&A session, Draghi made it clear that higher inflation will not automatically result in QE tapering. Instead, four elements need to be fulfilled before the ECB will conclude that inflation is on a ‘sustained adjustment’. These include that the higher inflation (1) is affecting the medium term, (2) is durable, (3) is self-sustained and (4) is region wide. In our view, core inflation will stay below 1.0% on average this year, as wage pressure will stay subdued particularly in the periphery countries. Hence, we expect the ECB to continue its QE purchases in 2018.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.