Shift in 'forward guidance' was not discussed on Thursday, ECB chief Draghi says
European Central Bank chief Mario Draghi left the door open to further policy easing, sending the euro slightly lower, albeit while noting that the balance of risks had moved towards a "more balanced configuration".
In his press conference following Thursday's policy decision, Draghi explicitly stated that the Governing Council had not discussed the convenience of changing their 'forward guidance'.
Did we miss the signal? Probably not, but Draghi did emphasise change to statement
However, the GC was unanimous in its decision to adjust the language regarding the balance of the risks to growth contained in the introductory statement, Draghi explained.
That is interesting because a report on 25 April cited three sources at or near the GC who said that "many" rate-setters see scope for sending a small hint in June that monetary stimulus might be reduced (a later report spoke of possible changes to the introductory statement).
Almost, according to Draghi "some" on the GC were now more "sanguine", not "many".
Yet Draghi did go on to add that it is "true that growth is improving, solid and broad".
"The risks surrounding the euro area growth outlook, while moving towards a more balanced configuration, are still tilted to the downside and relate predominantly to global factors," Mario Draghi and Vitor Constancio said in the introductory statement of the press conference.
Afterward, during the follow-up Q&A session, Draghi explained that domestic risks had lessened while those from overseas had increased.
The above might indicate that Draghi did in fact drop a hint, but at this meeting and not in June. Perhaps.
However, in their introductory statement Draghi and vice-president Vitor Constancio also said that: "At the same time, underlying inflation pressures continue to remain subdued and have yet to show a convincing upward trend. Moreover, the ongoing volatility in headline inflation underlines the need to look through transient developments in HICP inflation, which have no implication for the medium-term outlook for price stability."
He also indicated that "political uncertainty may impact medium-term outlook for price stability."
To take note of, in the Q&A Draghi drew special attention to the phrase "moving towards a more balanced configuration" should perhaps be noted.
Indeed, in response to a question he in fact told one journalist that was the headline to go with, afterwards adding "I´ll let you work that out".
Also worth considering, the source-based report published two days before saw the single currency snap higher, meaning that it is still on track for decent gains for the week as a whole, despite today's slip.
Perhaps most important of all, in the Q&A Draghi also stressed the need for governments to move "much more decisively" on structural reforms and "substantially step-up" their efforts, going on to add that the drive for structural reforms had slowed.
Analysts roughly divided
Commenting on the ECB's decision and Draghi's press conference, Timothy Graf, head of macro strategy at State Street Global Markets, said: "the ECB is still unwilling to veer too far off their present course. Low core inflation is clearly weighing in their minds, suggesting policymaker caution will dominate for at least a few more meetings.
"While the second half of the year might get more interesting if the better run of data continues and core inflation starts to trend higher, asset purchase levels and benchmark rates will likely hold for at least the next few meetings."
As of 19:30 GMT euro/dollar was down 0.18% at 1.0884 but euro area government bond yields were all sharply lower at the 10-year tenor, in part due to disappointment over the lack of specifics in the White House's tax cut proposals published the night before.