Forex trading – ECB pauses for breath as Mario Draghi bats away talk of expanding QE, helicopter money.


The European Central Bank (ECB) has quashed hopes it is about to step up stimulus efforts, after its policy meeting this week left interest rates on hold and the size and scope of its €1 trillion QE programme unchanged.

Under pressure from persistently low inflation and record-low bond yields, speculation had mounted ahead of the meeting that the ECB would take pre-emptive action to ensure it does not run out of assets to purchase.

However, Mario Draghi, the ECB president, said the governing council had not discussed extending the QE programme or adjusting the rules to make more bonds eligible. He also repeated that policymakers had not talked about the purchase of equities or helicopter money.

In what amounted to a fairly hawkish assessment, he gave only the faintest hint that the bank is prepared to do anything more, saying that working committees would look at QE, leaving the door open for adjustments as required. Nevertheless, Mr Draghi reiterated that the ECB would use all the instruments available within its mandate if required.

The euro rose against the US dollar after the ECB announcement, although there was some volatility around the press conference and EUR/USD tracked back lower. European equities were a bit lower, with the DAX shedding around 1%.

Mr Draghi reiterated his view that European governments need to help. Although he rejected any notion of diminishing marginal returns from monetary policy, the Italian stressed that it’s now time for fiscal and structural reform to do its work.

“The implementation of structural reforms needs to be substantially stepped up to reduce structural unemployment and boost potential output growth in the euro area,” said Mr Draghi in pointed fashion during his opening remarks.

“Structural reforms are necessary in all euro area countries. The focus should be on actions to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, which are vital to increase investment and boost job creation.”