Draghi: “Ready To Act If Needed”; Says Further Monetary Easing Will Be Re-examined in December

baldEuropean and U.S. equities are moving higher today and the euro is weakening against the dollar and touched a 2 week low following comments today from ECB President Mario Draghi who suggested that further monetary easing will be re-examined at their December monetary policy meeting when more macroeconomic projections will be available.

Draghi spoke about the ripple effects from weaker growth in emerging markets and the negative impact from falling commodity markets that add downside risks with inflation growth across the 19 member currency bloc.

“While euro area domestic demand remains resilient, concerns over growth prospects in emerging markets and possible repercussions for the economy from developments in financial and commodity markets continue to signal downside risks to the outlook for growth and inflation. Most notably, the strength and persistence of the factors that are currently slowing the return of inflation to levels below, but close to, 2 percent in the medium term require thorough analysis. In this context, the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting, when the new Eurosystem staff macroeconomic projections will be available” Draghi said in opening remarks.

“Ready to Act If Needed”

Draghi said that the ECB is “ready to act” if needed to help revive economic growth.

Oil prices have declined more than 50 percent since their summer highs in 2014 and remain one of the primary catalysts for weak inflation levels in the euro area.

In September inflation fell to -0.1 percent in the 19 member currency bloc.

“There was a very rich discussion about all monetary instruments that might be used… and the conclusion was: we are ready to act if needed” Draghi said.

Following the dovish outlook, the euro fell to a 2 week low below 1.12.

The ECB is already undertaking a €60bn a month, €1.1 trillion quantitative easing bond buying program started in March and will run through September 2016 to stimulate growth.

Predictably, at today’s meeting, which was held in Malta, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05percent, 0.30percent and -0.20percent.

-Johnathan Schweitzer

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