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27 May 2014
Draghi outspoken, QE coming?
FXStreet (Bali) - With the UK and US markets closed for holidays, comments by ECB President Mario Draghi were the main highlight.
Darghi said not to allow inflation to remain too low for too long, adding that "unwarranted tightening of monetary conditions from FX or market developments would require adjustment of our conventional instruments."
Most importantly, Draghi struck again a dovish tone on the following comments, saying that "at other end of spectrum a downshift in inflation expectations would be context for broad based asset buying plan."
Further headlines included, "immediate situation would require target measures help alleviate credit constraints", "expects low inflation to be prolonged but gradual return close to 2.0% target", "responsibility is to be alert to risks of inflation not returning to 2.0%.", "must be prepared for action if these risks emerge", and "need to be particularly watchful for a potential negative spiral of low inflation and low inflation expectations."
The Euro was nonreactive to Drahi's comments, although the real judgement to the latest headlines may not come until tomorrow, when London and the US markets come back online.
The comments may be seen as a double-edged sword, as on one hand the ECB might be communicating to the market that it now intends to rule out rate cuts or negative deposit rate, to instead implement a new QE program should inflation remain low.
Darghi said not to allow inflation to remain too low for too long, adding that "unwarranted tightening of monetary conditions from FX or market developments would require adjustment of our conventional instruments."
Most importantly, Draghi struck again a dovish tone on the following comments, saying that "at other end of spectrum a downshift in inflation expectations would be context for broad based asset buying plan."
Further headlines included, "immediate situation would require target measures help alleviate credit constraints", "expects low inflation to be prolonged but gradual return close to 2.0% target", "responsibility is to be alert to risks of inflation not returning to 2.0%.", "must be prepared for action if these risks emerge", and "need to be particularly watchful for a potential negative spiral of low inflation and low inflation expectations."
The Euro was nonreactive to Drahi's comments, although the real judgement to the latest headlines may not come until tomorrow, when London and the US markets come back online.
The comments may be seen as a double-edged sword, as on one hand the ECB might be communicating to the market that it now intends to rule out rate cuts or negative deposit rate, to instead implement a new QE program should inflation remain low.