Draghi reloads bazooka in ECB conference

23rd October 2015 By: Ranko Berich

ECB Press Conference – 22/10/15

QE is working as expected, but additional headwinds and risks have forced the ECB to seriously consider giving the eurozone another package of stimulus. Draghi’s repeated hints of action give the impression that the ECB will be reloading its monetary bazooka imminently.

The main message from this meeting is that even though the ECB’s existing measures are working, further easing is a possibility if financial conditions contract unexpectedly, or commodity prices suffer another shock. Reading between the lines, it’s clear that the ECB wants markets to take the possibility of easing action very seriously indeed. Even though FX is not a policy target, Draghi’s words have had their usual effect on the euro, which has weakened substantially.

Lending is actually improving in the eurozone and optimism has been fairly resilient, which suggests any additional QE may simply be the ECB erring on the side of caution. Either way, the central bank looks intent on hitting the eurozone with another big bang of liquidity, in a bid to ward off the deteriorating international conditions.