Draghi Outlines Easing Program Exit
At his yesterday’s speech at Frankfurt, Mario Draghi stated that in order to finish the asset purchase program, ECB must see a sustainable improvement in inflation. The President told: "We currently see inflation converging toward our aim over the medium term, and we are more confident than in the past this convergence will come to pass. But we still need to see further evidence that inflation dynamics are moving in the right direction. There is a very clear condition for us to bring net asset purchases to an end: we need to see a sustained adjustment in the path of inflation toward our aim.”
Thus, ECB policy will stage changes only when the inflation will get close to its 2% target. A first interest rate is projected in the second half of the next year. The deposit rate is expected to increase from current 0.4% to 0% by the end of 2018. Draghi confirmed: “Adjustments to our policy will remain predictable, and they will proceed at a measured pace that is most appropriate for inflation convergence to consolidate. Net asset purchases remain necessary for now to validate the stimulus that is already priced into key indices of financial conditions. When progress toward a sustained adjustment in the path of inflation is judged to be sufficient, net purchases will come to an end."
ECB President also mentioned Donald Trump’s decision to impose tariffs. Draghi said the Eurozone economy is unlikely to suffer from the order, at least not as the initial reaction.