• Drop in European inflation due to temporary factors such as Ukraine and energy
  • Most effects depressing inflation are temporary
  • New ECB lending programs to banks will be ineffective in helping economy without govt structural reforms

Draghi is dovish on the headline but he’s brushing off the inflation risks once again. The ECB proved to be behind the curve when they blamed temporary factors before and now market-based measures of inflation are flashing warning signs. Nothing here is new or particularly dovish (although I like selling the euro) but there’s a growing risk that eventually the ECB allows deflation to set in.

With German 10-year yields at 0.98% he should be hitting the panic button not playing it cool.