Draghi Cuts Forecasts and Hints At More Stimulus

draghiEuropean stock indexes are surging on Thursday morning after ECB President Mario Draghi cut euro area inflation and growth forecasts while hinting at adding fresh stimulus measures to counter some downside risks.

Following Draghi’s comments during a press conference, the euro plunged over 1 percent to 1.11 against the dollar and a basket of other currencies.

Draghi suggests that the ECB could expand its bond-buying program beyond September 2016 after acknowledging that their new forecasts were made on August 12th, before China’s black Monday which sparked a sell-off with global markets.

Although there was no official discussion about adding quantitative easing or mention about the lower bound of interest rates, Draghi said that he took note of the devaluation of the yuan last month and will wait to hear more details at the upcoming G20 meeting this week-end.

Dragi admitted that the euro area could see negative inflation due to lower oil and commodity prices.

But he fell short of saying that the euro area will experience full-blown inflation.

The ECB lowered their inflation target to 0.1 percent in 2015 compared to a previous inflation forecast of 0.3 percent made in June.

-Johnathan Schweitzer


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