Research Team at Rabobank, suggests that on the expected lines, the ECB kept all its policy settings unchanged today and it seems to have become a customary thing now, this was communicated with the release of a short statement.
“The main rationale for this unchanged policy stance was that whilst the risks to the economic outlook remained tilted to the downside and its GDP projections by the ECB staff were revised downward, these adjustments were insufficient (in Draghi’s words: “for the time being the changes are not substantial enough to warrant a decision to act.”) The staff projections for inflation were largely unchanged and is “broadly following the baseline scenario”, although Draghi conceded that “it will take a little longer” for inflation to reach its target.
The ECB still has full confidence in the beneficial effects of its policy measures; Mr. Draghi highlighted that although developments in bank credit continue to reflect their lagged relationship with business cycle “[...] monetary policy changes are increasingly filtering through to firms and households.”
President Draghi was again relatively tight-lipped, albeit not as much as in July. Altogether, the underlying tone struck by Draghi in this press conference was dovish. Especially the fact that Mr. Draghi cited comments by Peter Praet: “[…] underlying inflation pressures continue to lack a convincing upward trend and its future path is conditional upon our very accommodative policy stance.”
Indeed, we believe that the real reason why the Governing Council did not want to act now was because it wants to think more thoroughly about a medium term action and communication plan so as to prevent a repeat of last year.”
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