Draghi spoke on Saturday from the sidelines of the G20:
- We expect the drag on growth from fiscal consolidation to considerably diminish in coming months
- Sees stabilization in lending flows
- Eurozone faces long period of low inflation
- IMF and ECB have different deflation definitions
- ECB policies aren’t directly targeted at FX rates
- ECB will use further monetary policy instruments if needed to support recovery
Two minor, but notable changes in rhetoric stand out:
- ‘Directly targeted at FX rates’ is a slight departure from ‘not targeted at rates’. It basically says that Draghi is okay with euro weakness. Still, Nowotny was more explicit on Friday, saying the ECB expects the euro to fall.
- ‘Further monetary policy instruments’ is not only saying they’ll do more but also that they’ll use a different instrument — like sovereign QE.
- It’s not that Draghi is an eternal optimist but he believes that confidence is part of the economic equation and always tries to add a bit.
Draghi ECB press conference Sept 4
