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EUR: Risk to inflation mandate may trigger forceful action from ECB – MUFG

FXStreet (Delhi) – Lee Hardman, Research Analyst at MUFG, suggests that ECB will act forcefully if it sees its inflation mandate is at risk.

Key Quotes

“The euro is back under downward pressure in the near-term weighed down by dovish comments from ECB officials. The correction lower in risk assets has also stabilized providing a less supportive environment for the euro in the near-term.”

“ECB Chief Economist Praet stated overnight that the ECB would forcefully react by easing policy further if their inflation mandate was threatened. However, he stated that it was too early to draw firm conclusions form the current environment, but at the same time they didn’t want to be in a situation where we deny that the situation can be very unfavourable in the European context.”

“He added that the ECB is very vigilant and does not want an unwarranted tightening in monetary conditions. The comments reinforce expectations that the ECB is moving closer to easing policy further reflecting the increased risk of a negative external shock.”

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