European Central Bank President Mario Draghi is currently engaged in a Q&A session with reporters at his monthly press conference on ECB monetary policy.
At the outset, Draghi ran through the economic outlook as outlined in the latest update to the ECB’s staff economic projections. The new projections contain an upgrade to the 2014 growth forecast — the Bank now sees the euro area economy expanding by 1.2% this year, up from the previous 1.1% estimate.
The 2014 inflation forecast was downgraded to 1.0% from 1.1%, but the 2015 forecasts for both growth and inflation were left unchanged at 1.5% and 1.3%, respectively.
Notably, Draghi did not announce that the ECB would cease to sterilize purchases of euro area government bonds it makes under its Securities Markets Programme in order to boost liquidity in the banking system, a move that many were expecting.
The euro is trading around $US1.3800, up from levels around $US1.3750 before Draghi began speaking and up 0.5% on the day.
The ECB elected to leave its benchmark euro area refinancing rate unchanged at 0.25% today, as expected. The rates on the marginal lending facility and the deposit facility were untouched as well.
“The news that has come out since the last monetary policy meeting are, I would say, by and large on the positive side,” said Draghi, citing purchasing managers indices and consumer confidence surveys.
There was a growing camp that believed the Bank’s Governing Council would pull the trigger on a rate cut.
“It is important to note that our issue is one of when the ECB will act rather than whether it will act,” write interest rate strategists at Rabobank in a note to clients this morning.
“As such, any bearish market response today were the Bank not to act should be faded as this arguably simply represents the ECB deferring rather than dismissing additional policy support. Indeed, one might argue that no action today will see a need for great action later — another reason as to why one should look through any bearish market response.”
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