Despite Drama, Draghi Remains Committed to Current Plan

Speaking in Frankfurt on Wednesday, European Central Bank President Mario Draghi reconfirmed that despite renewed confidence about the region’s inflation outlook. “We currently see inflation converging towards our aim over the medium term, and we are more confident than in the past this convergence will come to pass, but we still need to see further evidence that inflation dynamics are moving in the right direction. So monetary policy will remain patient, persistent and prudent."

Since 2011 when a debt crisis hit the eurozone, the ECB has implemented a large-scale bond-buying scheme in order to encourage growth and lending. In addition, it implemented record low interest rates, which Draghi has maintained will remain low for “a long time”, which analysts have interpreted to mean that rates will begin rising sometime next year.

Just last week the ECB revised its inflation forecasts for 2019, moving them lower while keeping the forecasts stable for 2018 and 2020. The annual headline inflation is predicted to hit 1.4 percent this year, 1.4 percent in 2019 and 1.7 percent in the following year.

The euro was slightly lower just after noon in London, trading at $1.2379.

Members of the European Union are also struggling with President Trump’s proposed tariffs which are threatening to wreak havoc on exports, specifically in the automobile industry. European Commission Vice President Jyrki Katainen told the European Parliament that the Commission is focusing on problem-solving, rather than on provoking further problems. He expressed optimism that the theoretical trade war would be resolved amenably for both sides. The European Commission is lobbying hard for an exemption to the tariffs, though whether it will be granted has yet to be determined.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.