Emily Cadman Closed Live blog: ECB

Mario Draghi

ECB president Mario Draghi began his monthly press conference shortly after 1.30 GMT. Earlier, as expected, the ECB left rates on hold.

Follow the questions and reaction live here with capital markets editor Ralph Atkins and Emily Cadman

Eurozone official interest rates have been left unchanged by the European Central Bank. But Mr Draghi will unveil fresh economic forecasts at his press conference starting shortly in Frankfurt. As Claire Jones, our ECB correspondent, points out in her preview, the most important figure could be the forecast for inflation in 2015. With the eurozone at risk of falling into a damaging deflation, the ECB could soon come under pressure to take additional stimulus measures.

European Central Bank keeps interest rates on hold

ECB mulls further action after last month’s rate cut surprise

The consensus among ECB watchers in financial markets is that Mr Draghi will not announce additional measures today – but, as last month’s surprise rate cut proved, he’s always good for a surprise.

A joker could be a possible announcement about publishing ECB minutes – although Claire Jones played down the chances of this happening in an earlier Money Supply post.

This is how inflation stands at the moment:

Elsewhere today, the Bank of England also held rates and voted to maintain the stock of the central bank’s gilt purchases at £375bn.

The press conference is starting a little late – but only by a few minutes so far.

Maybe Mr Draghi wanted to look at the exceptionally large upward revision to US GDP figures just released?

Here he comes. Should be underway in a few minutes

Here we go… Mr Draghi confirms rates unchanged.

Mr Draghi repeats that the eurozone may experience “a prolonged period” of low inflation. Forward guidance remains in place – rates will remain at present or lower for an “extended period of time”.

ECB’s remains willing to consider “all available instruments,” Mr Draghi reiterates. (That would appear to include quantitative easing, or negative interest rates on its deposit facility).

Unemployment in the euro area remains high, and the necessary balance sheet adjustments in the public and the private sector will continue to weigh on economic activity, says Draghi

Here come the economic forecasts. The eurozone economy is expected to grow by 1.1 per cent next year and 1.5 per cent in 2015. The 2014 forecast is slightly higher than the ECB expected in September.

The ECB is forecasting 1.4 per cent eurozone infaltion in 2013, 1.1 per cent in 2014 and at 1.3 per cent in 2015.

You can read the text of Draghi’s opening remarks here

The inflation forecasts for this year and next are down 0.1 percentage points and 0.2 points.

This is the first time the ECB has forecast inflation for 2015. At 1.3 per cent, inflation would still be significantly below the ECB’s target of an annual rate “below but close” to 2 per cent. By itself, that would justify fresh ECB action.

“Our forward guidance” is working, says Mr Draghi

Mr Draghi is listing all the eurozone bond yields that have fallen….as a result of the ECB. “All this without [looking at] the equity markets.”

“We’re seeing positive developments both before and since our November decision”

“All this happens in a situation in which inflation expectations remained firmly anchored.” He also points out that inflation excluding food and energy is going to “drift slightly higher” over the forecast horizon.

The euro has fallen against the dollar in the wake of inflation revisions

More on why the ECB has not acted today: Mr Draghi warns it would be a mistake to expect a quick reaction from the ECB’s previous actions.

“It needs time to fully produce effects”.

From our eurozone economics correspondent


Apologies for the interruption to this service, our link to the ECB crashed. Catching up fast….

A dose of scepticism from Mr Draghi about the effectiveness of further stimulus measures.

“Economies have to be prepared structurally to produce effects in a sustainable way,” he warns.

In other words, you can’t just create more debt.

The ECB is watching the exchange rate, but Mr Draghi warns listeners to “keep in mind it is not a policy target”.

Now we’re off on a tour of the eurozone. Mr Draghi praises “very significant” progress made by Portugal.

Mr Draghi is stressing that the ECB has a “powerful artillery” but emphasises the governing council has not reflected on which instrument it would use in which circumstance. “It is too early to speculate”.

His message is that the interest rate cut last month is still having effects – as is the ECB’s forward guidance.

As expected, there’s been no announcement on publishing minutes – see Will the ECB’s minutes overrun? for background.

The situation in the eurozone is “quite different” to Japan in the 1990s.

“We have taken decisive monetary policy measures.”

He also points to the ECB’s asset quality review of eurozone banks – making the point is that the eurozone is working faster to fix the banking system than Japan did. “This action has already started.”

Another reason why the eurozone is not Japan in the 1990s.

“Countries in the euro area have made significant progress in addressing structural weaknesses.”

A question on the impact on the eurozone of US Fed tapering: Mr Draghi notes impact of the turmoil in US treasuries in May was “quite limited,” especially compared with the impact on emerging markets.

Not everyone is happy with no-action decision, this is from Aberdeen Asset Management fixed income investment manager Patrick O’Donnell:

“The market could be quite disappointed in Draghi. Anticipation was growing that he could be prepared to take more aggressive policy action to fight disinflationary forces. While he’s keeping all options on the table, the market might interpret this reactive rather than proactive stance as a worrying return to form for the ECB.“

Mr Draghi says he’d rather talk about the ECB’s “array” of instruments, rather than its “artillery,” which he says is “militaristic language.”

But the euro has recovered most of its losses against the dollar:

That’s it. Mr Draghi has finished taking questions. His main message was that the effects of actions taken so far by the ECB were still working through. But the ECB stood ready to do more if justified in the future – without going into any details of which instruments it might use, now interest rates are almost at zero.

He also released economic forecasts showing the ECB had become slightly more optimistic about eurozone growth next year, but expected an inflation rate of just 1.3 per cent in 2015.

He set out at some length why the eurozone would not fall into a damaging deflation spiral as seen in Japan since the 1990s.