Investing.com – As European Central Bank (ECB) president Mario Draghi provided new growth and inflation forecasts at his press conference on Thursday, he also revealed a more hawkish stance on the future path of monetary policy, despite the fact that the euro area central bank made no changes to policy.
The ECB staff increased growth projections for 2017 to 1.8%, from 1.7%, and for next year to 1.7%, from the previous 1.6%, while holding their forecast for 2019 steady at 1.6%.
The central bank’s experts also raised their inflation forecast for this year to 1.7%, from the previous 1.3% and to 1.6% from 1.5% for 2018, while leaving the 2019 projection unchanged at 1.7%.
Despite the increase in the inflation projections, Draghi insisted that “underlying inflation pressures continued to remain subdued” and once again promised to look through headline inflation as long as it was “judged to be transient and to have no implication for the medium-term outlook for price stability”.
However, despite those repetitions, Draghi appeared to indicate that the ECB had become slightly more hawkish in its outlook.
He noted that prior risks of deflation had “largely disappeared” and suggested that the ECB “no longer had a sense of urgency” is taking further action.
Specifically, Draghi pointed out that the central bank members had decided to remove the phrase indicating that “if warranted, to achieve its objective, the Governing Council will use all instruments available in its mandate” precisely because of their belief that no additional measures will be needed.
Additionally, Draghi explained that there was no discussion of further rounds of cheap lending to financial institutions, known as TLTROs, whose last issue from the prior round was set for March 23.
Furthermore, he admitted that the Governing Council discussed changing the phrase “we continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases” by removing the word “lower” as they do no longer anticipate any more than it will be necessary to make further reductions to rates.
The euro strengthened on the back of Draghi’s remarks, hitting an intraday high of 1.0615 against the dollar, compared to 1.0556 just ahead of the start of the conference. At 9:51AM ET (14:51GMT), EUR/USD was last up 0.51% at 1.0594.