LONDON, September 3, 2015 /PRNewswire/ --
The ECB has admitted that deflation risks have still not gone
away in a very dovish statement at their press conference today
following their decision to keep interest rates at historical lows.
Mario Draghi even went as far as to say that the Eurozone
could easily experience some months of deflation in the near
future. So, it came as little surprise that both growth and
inflation expectations have been lowered but most interestingly the
ECB forecasts inflation to be 1.7% in 2017, well below their target
of 2.0% before they are due to end QE in a year's time. This
means that Eurozone QE is most likely to continue beyond
September 2016 and as a result EURUSD
has fallen over 100 pips to 1.1110 at the time of writing. In
fact the euro softened just as Draghi was sitting down and before
he had commenced the statement.
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The underlying message this gives investors is that certainly
for the ECB, the end of monetary stimulus measures are a long way
off. On several occasions in the statement and during the Q
& A session Draghi referred to the risks from slowing growth in
emerging economies and this is something that has been a recurring
theme at both Bank of England and
Federal Reserve meetings throughout this year. Now that these
risks from emerging markets are being realised by the financial
markets, we can expect focus on them to feature more prominently
going forward. This could very easily cause the Fed to delay
a rate hike this month and US Treasury yields reflected this by
softening following the ECB decision and during the statement.
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