European Central Bank President Mario Draghi said on Thursday that the Governing Council’s latest decision to drop the easing bias on asset purchases was taken unanimously.
Unusually vocal on global trade, Draghi said disputes must be discussed and solved in a multilateral framework, adding the warning that unilateral decisions were dangerous. The ECB Chief also noted that the immediate spillover of US import tariffs on foreign steel and aluminum are unlikely to be that big.
New information confirmed “the strong and broad-based growth momentum in the euro area economy, which is projected to expand in the near term at a somewhat faster pace than previously expected,” Draghi said in the introductory statement for the post-decision press conference in Frankfurt.
Earlier on Thursday, the bank left its key interest rates and asset purchases unchanged and dropped the reference in the forward guidance to being ready to raise the size and duration of the stimulus if the macroeconomic outlook turned less favorable.
The euro strengthened on the news of the ECB dropping its easing bias on asset purchases.
Draghi pointed out that the easing bias in the forward guidance was introduced in 2016, when the ECB trimmed the size of its monthly purchases from EUR 80 billion to EUR 60 billion. So, dropping the easing bias is actually “backward-looking”, he said.
The move was not totally unexpected as over the past few months as a divide in Governing Council had surfaced with some policymakers seeking such a tweak to the forward guidance language. In previous meetings, Draghi also said the bank would revisit its policy communication early this year.
Policy continues to remain reactive, and not proactive, Draghi told reporters. He also added that trade and financial deregulation were the two main risks today.
The latest ECB Staff projections, which Draghi unveiled during the press conference, showed an upgrade to the growth outlook for this year to 2.4 percent from 2.3 percent.
Projections for next year and 2020 were kept unchanged at 1.9 percent and 1.7 percent, respectively.
The inflation forecast for this year was maintained at 1.4 percent, while the outlook for next year was trimmed to 1.4 percent from 1.5 percent.
For 2020, the inflation forecast was raised to 1.7 percent from 1.5 percent.
The inflation rate has been away from the ECB’s target of “below, but close to 2 percent” for sometime now.
“This outlook for growth confirms our confidence that inflation will converge towards our inflation aim…over the medium term,” Draghi said.
However, measures of underlying inflation remain subdued and have yet to show convincing signs of a sustained upward trend, he added.
Policymakers were not yet ready to declare victory on inflation, Draghi said. “We need confidence, persistence and patience,” he said.
“In this context, the Governing Council will continue to monitor developments in the exchange rate and financial conditions with regard to their possible implications for the inflation outlook,” Draghi said.
“Overall, an ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up and support headline inflation developments over the medium term.”
Risks surrounding the euro area growth outlook are broadly balanced, though there were downside risks such as rising protectionism and exchange rate developments.
Regarding the Latvian banking scandal, Draghi said the ECB did not have enough information on the matter and was sending a letter to the European Court of Justice seeking a clarification on whether the detention of the central bank governor Ilmar Rimsevics were in compliance to the ESCB statute.
Draghi also said that that current situation regarding the anti-money laundering is not satisfactory and sought more cooperation between national authorities themselves and with supervisors.