Draghi: More upbeat – Deutsche Bank

Yesterday's comments from Mr Draghi at the ECB forum in Sintra seemed to indicate that he thought the last ECB meeting ended up in a draw and that he wanted to take the first penalty kick in the aftermath, notes the analysis team at Deutsche Bank. He certainly seemed more upbeat yesterday than in his more balanced press conference that obviously more reflected the views of the committee while the changes were subtle but significant, they further add.

Key quotes

“Specifically, Draghi said that “as the economy continues to recover, a constant policy stance will become accommodative, and the central bank can accompany the recovery by adjusting the parameters of its policy instruments – not in order to tighten the policy stance, but to keep it broadly unchanged”. In other words if prices rise as the ECB expect in 2018 ECB policy will become more accommodative as inflation picks up.”

“Draghi also added that “all the signs now point to a strengthening and broadening recovery in the Euro area” and that “deflationary forces have been replaced by reflationary ones”. The ECB President also cited that risks of “hysteresis effects” had diminished and that “now we can be confident that our policy is working and that those risks have abated”. Draghi also suggested that political winds are now becoming tailwinds.”

“As our rates strategists’ aptly called it, the speech seemed to mark a transition from the “whatever it takes” period to “it will take less” and a potential slow turning point in the direction of travel towards tighter policy. The final day of the Sintra ECB forum is today and a as reminder a policy panel between Draghi, the BoE’s Carney, BoJ’s Kuroda and BoC’s Poloz is due at 1.30pm BST which will be worth watching.”