The European Central Bank’s monetary policy meeting was held on Thursday in Tallinn, Estonia. At the meeting, the central bank decided to leave monetary policy and QE unchanged.
Much to the disappointment of the markets, the ECB’s meeting yesterday was mixed, if not dovish which saw the euro giving up the gains on the day.
The run up to $1.1200 in the EURUSD was partly on account of a weaker US dollar and the expectations from the markets about a hawkish ECB verdict. The euro closed at $1.1219 on Thursday after rising to a session high of 1.1236.
However, with inflation (flash) estimates for May showing that core inflation rose just 0.9%, the ECB had to manage expectations. Final inflation figures from the Eurozone will be released next week.
ECB meeting: Hawkish or Dovish?
Some analysts called yesterday’s ECB meeting dovish, although it was mostly balanced. The ECB is likely to maintain its stance even if it means having to brace criticism from some of the stronger countries in the Eurozone who want the ECB to tighten monetary policy.
Draghi has repeatedly come under fire from lawmakers in Germany and Netherlands, two countries which favor a stronger euro. The German chancellor, Ms. Angela Merkel had commented a few weeks ago that the euro currency was weaker.
The ECB maintained the status quo and also released its economic projections. Inflation, according to the ECB’s projections is now expected to average 1.5% this year. This is a downward revision from 1.7% in March. For 2018 and 2019, inflation is expected to rise 1.3% and 1.6% respectively.
At the post-ECB rate decision press conference, Draghi told reporters that the 25-member governing council had formed a consensus about changing the forward guidance. However, he said that no discussions took place on the means and timing of a reduction in the central bank’s stimulus program.
“There wasn’t any discussion on normalization,” Draghi said making it clear that policy makers still felt that it would be too early to even think about tightening policy.
Full article: https://www.orbex.com/blog/2017/06/ecb-lowers-inflation-forecasts-euro-bulls-disappointed/