6 Feb 2014
Flash: Draghi does mention recent EM-FX turmoil - Rabobank
FXStreet (Guatemala) - Strategists at Rabobank noted the comments from the ECB earlier and said the most significant departure from last month’s opening statement was that Mr. Draghi specifically mentioned the recent turmoil in emerging markets as a potential risk to the economic outlook (which was kept to the downside).
Key Quotes:
“The ECB kept policy unchanged today, in line with our expectations. Draghi's opening statement contained few surprises. The ECB’s forward guidance was firmly reiterated with the Governing Council being “determined to maintain a high degree of accommodation” and “determined to take further decisive action if needed.” The ECB president repeated that the ECB stands “ready to consider all available instruments.””
“With regard to the latest inflation data, Draghi noted that the decline was mainly due to energy price developments, although he admitted that the January figure was also below the ECB’s own expectation”.
“There were dozens of questions about deflation/disinflation in the Q&A session, but Draghi pointed out that the ECB doesn’t solemnly look at the (low) level of inflation, but also at the key drivers behind its recent fall. Most of these drivers are of a benign nature (as we have argued ourselves), such as the declines in food and energy inflation, the falling contribution of indirect taxes and declining unit labour costs in the periphery due to supply side reforms. At the same time there is the acknowledgement by Draghi that low inflation for a prolonged period of time is a “risk in itself”. Long-term inflation expectations remain firmly anchored, for now, however”.
Key Quotes:
“The ECB kept policy unchanged today, in line with our expectations. Draghi's opening statement contained few surprises. The ECB’s forward guidance was firmly reiterated with the Governing Council being “determined to maintain a high degree of accommodation” and “determined to take further decisive action if needed.” The ECB president repeated that the ECB stands “ready to consider all available instruments.””
“With regard to the latest inflation data, Draghi noted that the decline was mainly due to energy price developments, although he admitted that the January figure was also below the ECB’s own expectation”.
“There were dozens of questions about deflation/disinflation in the Q&A session, but Draghi pointed out that the ECB doesn’t solemnly look at the (low) level of inflation, but also at the key drivers behind its recent fall. Most of these drivers are of a benign nature (as we have argued ourselves), such as the declines in food and energy inflation, the falling contribution of indirect taxes and declining unit labour costs in the periphery due to supply side reforms. At the same time there is the acknowledgement by Draghi that low inflation for a prolonged period of time is a “risk in itself”. Long-term inflation expectations remain firmly anchored, for now, however”.