Is Draghi Dovish after a Hawkish Signal Last Month?

ECB press conference

The European Central Bank (or ECB) conducted its press conference on Thursday, July 20, 2017. ECB president Mario Draghi said at the conference that the ECB will keep its key interest rate unchanged at 0.0% in the monetary policy review meeting.

Is Draghi Dovish after a Hawkish Signal Last Month?

Draghi’s statement

Draghi said that inflation (VGK) (IEV) (EZU) isn’t where the ECB wants it to be or where it should be. The inflation level below the ECB’s target level mainly caused the central bank to maintain a dovish stance. In the June 2017 meeting, Draghi hinted that there will be no room for further rate cuts in the near future. It’s also expected that the central bank may start its tapering discussion in September 2017.

Draghi said, “If the inflation outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the governing council is ready to increase the program in terms of size and/or duration.”

Many economists and market participants are expecting the improving economic environment in the Eurozone (HEDJ) to help the central bank change its strategy in the near future. The September 2017 meeting will be an important event for market participants since we might see that ECB policymakers may discuss some change in strategy.

In the next part of this series, we’ll analyze the performance of the market and the euro after Draghi’s statement.