Until the end, M. Draghi should remain dovish
M. Draghi, who will attend the last Governing Council meeting of his eight-year term as ECB president on October 24, should reiterate that monetary policy alone cannot resolve everything and that since inflation is still too low, fiscal policy should play a bigger role.
The risk balance should remain the same and M. Draghi will certainly communicate about downward revision risks in upcoming economic forecasts in December: indeed, according to the minutes of the latest ECB meeting we believe growth forecasts are too optimistic, especially given prolonged uncertainties like the ongoing trade war and Brexit.
Many measures, already announced during September’s press conference, will be implemented in the coming weeks. M. Draghi will probably come back on dissensions among the ECB members, as some of them expressed publicly their skepticism about the new bond-purchase program and the inflation target and suggested to include goals other than inflation or to define a range around the ECB inflation target.
In conclusion, we expect M. Draghi to be dovish until the end of his mandate.
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