Investing.com –European Central Bank (ECB) president Mario Draghi underlined the euro area monetary authority’s dovish stance on Thursday, stressing the need for “very substantial” accommodation, while indicating that future discussions about quantitative easing (QE) should take place in the fall.
The ECB kept monetary policy unchanged on Thursday with the main refinancing rate left unchanged at 0%, the rate on bank overnight deposits kept at -0.40%, while the rate on the marginal lending facility, or emergency overnight borrowing rate for banks, stayed at 0.25%.
The central bank also left unchanged its €60 billion ($67.5 billion) per month asset purchase program and kept its promise to run the accommodation “until the end of December 2017, or beyond, if necessary”.
Furthermore, the ECB repeated that it was open to increase purchase levels if economic developments became unfavorable.
“If the outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the program in terms of size and/or duration,” it reiterated in the statement.
At the press conference, Draghi reiterated that the risks to the economic outlook are “broadly balanced” and reiterated that “headline inflation is dampened by the weakness in energy prices” while underlying inflation remained at “subdued levels”.
“Therefore, a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up and support headline inflation developments in the medium term,” he specified.
Draghi concluded his speech by repeating his call for structural reforms to be “substantially stepped up” and suggested that fiscal policies needed to intensify efforts towards achieving a more growth-friendly composition of public finances.
After hitting session lows after the announcement was made earlier, the euro has been strengthening to hit session highs during the press conference.
During the question and answer period, Draghi indicated that the ECB had not held talks over the possibility of making changes to QE.
He added that there was “no precise date” to do so, but expected that those discussions “should happen in the fall, or autumn since we’re in Europe”.
As the question and answer period in Draghi’s press conference comes to a close, EUR/USD traded at 1.1555, near session highs, at 9:11AM (13:11GMT) compared to 1.1485 prior to the speech, while EUR/GBP was at 0.8904 from 0.8870 earlier.
Meanwhile, European stock markets continued to trade higher, though they pared gains during the speech. The Euro Stoxx 50 rose 0.73%, Germany's DAX gained 0.68%, France’s CAC 40 advanced 0.50%, while London’s FTSE 100 traded up 0.66%.
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