Investing.com - European Central Bank President Mario Draghi said Thursday that the central bank's monetary policy can continue on its current path of removing accomodation, even with its inflation outlook appearing to some to be lower than its mandated level.
Earlier, the ECB left rates untouched in a widely-expected move.
It also confirmed plans to put an end to the asset purchase program at the beginning of the next year. But Draghi stressed at the press conference that policymakers had not “even discussed when to discuss” plans for reinvestment of those assets.
Although the ECB cut its euro area growth outlook for this year, to 2% from 2.1%, and next year, to 1.8% from 1.9%, Draghi said “risks surrounding the euro area growth outlook can still be assessed as broadly balanced”.
“The major source of uncertainty we see in global outlook comes from rising protectionism,” Draghi said. But he noted that the ECB was “observing upside strength in the broader economy” and highlighted that the spillovers from emerging markets like Turkey and Argentina “have not been substantial”.
When questioned whether the current forecast for 1.7% inflation was consistent with the ECB’s mandate, Draghi stressed that it was, reminding reporters that the ECB’s objective is “close to, but below 2%," implying that the central bank is well-positioned to continue its move forward with the removal of accommodative policy.
The euro posted a noticeable spike following the inflation response, but has since pared gains. At 11:30 AM ET (13:30 GMT), the single currency was last up 0.55% at $1.1690, compared to $1.1631 ahead of the ECB policy decision announcement. EUR/GBP inched up 0.06% to 0.8915, just ahead of 0.8914 seen prior to the policy release.
The noticeable difference between the dollar and pound pairs was due to a weaker-than-expected rise in U.S. retail inflation.