Fundamental Comment

ECB Draghi: There was no discussions of cutting interest rates

ECB Draghi press conference

At the beginning of the press conference, ECB President Mario Draghi highlighted the softening global growth dynamics, weak international trade and weakness in the manufacturing sector.

However, Draghi said that there was no discussion of cutting rates as soon as today.

Inflation expectations have dropped, so there is more need for monetary support, Draghi said. Somewhat lower growth is coming in the second and third quarters of the year, he added.

The outlook is getting worse, especially after the deterioration in the manufacturing sector, given the risks stemming from trade wars, bingo and a hard Brexit.

While past projections have referred to a rebound in the second half of the year, it is less likely now that this would happen, but recession risk is still pretty low, Draghi said.

He noted that risks remained tilted to the downside because of geopolitical uncertainties, while underlying inflation remained generally muted.

“An ample degree of monetary accommodation is still necessary” to bolster the European economy, Draghi stressed.

Elaborating the statement more, Draghi said there is “a consistent degree of optionality,” noting that if the medium-term inflation outlook falls short, the ECB is determined to act.

We want to see the next projections before taking action, Draghi said. This indicates that September will be the clear date for any move.  

As of 12:48 GMT, the euro rebounded from a two-moth high of $1.1101 to hover higher around $1.1168 as Draghi sounded less dovish than the statement.

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