Monday 20 November 2017

ECB to hold off on action until June forecasts

The President of the European Central Bank, Mario Draghi
The President of the European Central Bank, Mario Draghi

THE European Central Bank (ECB) will probably hold off on policy action tomorrow, waiting for new forecasts from its staff in June before deciding whether to counter low inflation that ticked up last month.

The ECB Governing Council meets in Brussels against the backdrop of a Franco-German spat over ECB policy towards the euro's exchange rate – one factor the bank's president, Mario Draghi, has identified as a potential trigger for policy action.

Ahead of the meeting, markets pushed the euro above $1.39 and towards its high for this year after surveys showed eurozone firms enjoyed a brisk start to the second quarter.

Last month, Mr Draghi outlined scenarios that could prompt ECB action: a de facto tightening of monetary policy caused by market moves like further euro gains, fresh trouble transmitting ECB policy to all parts of the eurozone, or a deterioration of the inflation outlook. None of the scenarios appears to have materialised to a sufficient degree yet to prompt ECB action.

The euro rise has so far stopped short of $1.40, the mark a Reuters poll of economists suggested would prompt action.

Irish Independent

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