ECB's Draghi: More rate cuts are part of the central bank's toolkit

Author: Justin Low | Category: Central Banks

Draghi's speech in Sintra has been published


  • QE still has considerable headroom
  • QE limits are specific to contingencies faced by the ECB
  • If outlook doesn't improve, additional stimulus is needed
  • Negative rates have proven to be a very important tool
  • Indicators for the coming quarters point to lingering softness
  • ECB able to enhance forward guidance by adjusting its bias and conditionality to account for variations in adjustment path of inflation
  • In the coming weeks, we will deliberate how our instruments can be adapted commensurate to the severity of the risk to price stability
ForexLive
Dovish stuff there from Draghi and that has sent the euro to its lows for the day with EUR/USD testing the 1.1200 handle currently. Meanwhile, EUR/JPY also falls to a two-week low of 121.21 as it is all but confirmed now that the central bank has shifted to a more dovish bias moving forward.

I won't say this is anything that markets haven't thought of since the ECB meeting two weeks ago but for Draghi to utter these words himself, it basically confirms that the next step to be taken by the ECB will be to communicate a more dovish forward guidance on rate cuts. Once again, Draghi delivers the goods:


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