Draghi hints at ECB policy reversal in his Sintra spreech
The ECB has not only given up on its policy normalization plans, it has over the past two weeks embarked on the road towards further policy easing. At the June policy meeting, ECB President Draghi already adopted a very dovish tone and stated that the whole monetary toolbox was available in case of contingencies.
- Following a very dovish June press conference, ECB President Draghi hinted at today’s Sintra speech at new easing measures.
- Draghi has made clear that additional stimulus measures – potentially including all instruments – would be necessary unless the outlook improves.
- Other ECB speakers have made rather clear this week that the recent collapse in inflation breakevens is seen as intolerable.
- We now expect further ECB monetary policy action in September, if not earlier.
- The size of the easing package is uncertain, and may depend on exogenous factors (trade tensions, Brexit, Italy). Given the risks associated to the de-anchoring of inflation expectations, a light-hearted approach is unlikely.
- Below we discuss and rank the available easing tools.