ECB monetary policy: key comments from Draghi

Following the European Central Bank’s latest monetary policy committee meeting, ECB President Mario Draghi reassured investors of his commitment to do more if needed to achieve “a sustained adjustment in the path of inflation consistent with its inflation aim”.

Interest rates to stay low: The ECB committed to keeping interest rates at record lows beyond December 2017, the current end date for their asset purchase programme. Draghi confirmed: “We continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases.”

Outlook for inflation: On the sharp increase in euro area annual HICP inflation reported by Eurostat, from 0.6% in November 2016 to 1.1% in December, Draghi noted that “this reflected mainly a strong increase in annual energy inflation, while there are no signs yet of a convincing upward trend in underlying inflation.”

Too early to comment on Trump and Brexit: Asked about the impact of Trump’s comments on the US dollar, the risk of a future currency war, and the potential rise and impact of greater protectionism, Draghi was unwilling to pass judgement: “Really it’s very early for us to comment on the to-be President Trump’s statements. It’s just early.”

However, on the possibility of a currency war he did remind everyone that “there is a very strong international consensus in the G20 and the G7 to refrain from competitive devaluations”.

Asked a second time in reference to Trump’s comments on the Euro breaking up – “Keeping it together is not going to be as easy as people think” – Draghi stuck to the script: “I just won’t make any comment on that; it’s just too early. Let’s see what are the real policies following these statements. I’d rather comment on policies and policy actions than just statements.”

The big unknown with Donald Trump is just how wide the gulf is between what he says and what he actually believes. In his inauguration speech Trump castigated politicians: “We will no longer accept politicians who are all talk and no action”. What is clear is that If Trump does follows through on his protectionist rhetoric it represents a major shift in the world order.

On BREXIT, Draghi would not be drawn into speculation. “I simply say again it’s too early to say. The final outcome of the negotiations will be very important. But also, whether it will have economic consequences will depend on the shape of the outcome and the length of time it will take. So it’s too early to comment.”

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