Mario Draghi plays for time

Demand for the Euro could weaken markedly if the ECB looks less likely to return to a hawkish bias in the coming months, given the increasing shift towards tighter monetary policy from other major central banks.

ANALYST’S TAKE: “There has been a lot of speculation about a more explicit phasing out (of monetary stimulus) but I think the European Central Bank wants to be more careful given the fragile nature of the recovery”, said Craig Erlam, senior market analyst at OANDA. Draghi did not say whether this discussion would take place at the governing council’s next scheduled monetary policy meeting, on September 6 and 7.

Market watchers will be looking to see if the recent strength of the euro and the yen influence policy outlooks from the European and Japanese central banks.

However, Didier Rabattu, head of equities at Lombard Odier Investment Managers, believes ongoing weakness in inflation in the bloc and concern over the banking sector could dampen the Draghi’s enthusiasm for raising rates.

But the governing council will readdress the continuation of its quantitative easing programme this autumn, European Central Bank president Mario Draghi told a press conference in Frankfurt. This suggests that easy monetary policy will have to continue for years to come.

The euro is now at $1.15135, backing off slightly from Tuesday’s $1.1583, its highest level since May 2016 but still maintaining gains of 3.0 percent since ECB President Mario Draghi’s Sintra speech and comfortably holding above the 1.15 line breached on Tuesday. Policymakers would revisit the topic only in the autumn, he said.

But wage growth remains anaemic, keeping a lid on inflation, which is likely to undershoot the ECB’s target of nearly 2 percent at least through 2019. Federal Reserve, is expected in the near future to begin narrowing its quantitative easing program, in which it buys government and corporate bonds in attempts to drive down market interest rates.

It reversed the drop as Draghi pointed to a timeline for policy makers to consider any change in their language, even as he pledged additional stimulus if needed.

The reason why little is expected right now: Draghi and top bank officials want to avoid a sudden market reaction that could prematurely send business and government borrowing costs higher before the phase-out starts.

Draghi is not expected to give much away at his news conference following the meeting of the bank’s 25-member governing council, at which no changes in the stimulus are expected.

‘An ever larger number of passengers are flying EasyJet, two million more this quarter than a year previously.The probmem is that EasyJet is struggling to get its new passengers to pay the same as the old ones did, ‘ said Nicholas Hyett, equity analyst at Hargreaves Lansdown. The bank has said it won’t raise its benchmark interest rate from zero until the purchases end.