US President Trump tariff move "dangerous" — European Central Bank

11 March, 2018, 01:40 | Author: Barbara Daniel
  • EURUSD outlook Economic information for the week ahead

Also the central bankers did not changed the plan for quantitative easing.

The ECB held interest rates on the main refinancing operations unchanged at 0.00 percent, according to a statement from the bank after Governing Council on Thursday. But its statement omitted an earlier promise that it could increase its bond-purchase stimulus in size or duration if the economic outlook worsens.

Bond yields too partially erased their earlier rise, as markets interpreted Draghi's comments as suggesting that any policy normalization would be very gradual.

The ECB also repeated that its bond purchase program will continue as planned. That constitutes a step towards ending the crisis-era stimulus measures.

For its part, the Bank of Japan, which abandoned setting short-term interest rates altogether, is also keeping steady asset purchases that have been in place in various forms for most of almost 20 years and have greatly intensified recently.

The final point is that long-term market interest rates will start to move ahead of short-term rates.

"As we pointed out before, sooner or later, the strong euro had to have some impact".

Minutes from January's meeting showed policymakers who favor dismantling bond-buying faster in light of stronger growth are increasingly vocal.

Late in the session, President Trump imposed import tariffs on steel and aluminum, while softening his stance by announcing exemptions for Canada and Mexico, and leaving open the chance for other countries to obtain their own.

"An escalation of trade wars would lead to greater political uncertainty and a weaker United States dollar". They could depress confidence among consumers and businesses, he said, which could weaken both growth and inflation.

During the subsequent European Central Bank press conference, Draghi was able to tone down any hawkishness in the statement in his responses to questions from the assembled group of journalists.

On the Trump tariffs he said potential trade disputes "would introduce higher uncertainty in the future growth path".

Wall Street stocks were also higher in late morning trade, with the Dow up 0.2%.

But it was on the path of policy tightening that Draghi dialled back the most on.

With regard to inflation expectations, the European Central Bank foresees the annual Harmonised Index of Consumer Prices (HICP) inflation at 1.4 percent in 2018, 1.4 percent in 2019 and 1.7 percent in 2020.

Policy continues to remain reactive, and not proactive, Draghi told reporters.

On the currency markets the dovish message won out. Against the pound, the euro was 0.13% lower at £0.8916 and fell 0.65% to Y130.81 versus Japan's yen.

ECB President Mario Draghi said Thursday that the solid economic recovery in the region supported the decision to remove the so-called easing bias.

The Stoxx Europe 600 index climbed 1.1% to 376.62, the best close since February 28, FactSet data showed. United States gold futures were down 0.4% at $1,321.80.

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