Mario Draghi, president of the ECB, said in a press announcement in Tallinn, Estonia, that the bank considered the risk in the region to now be “broadly balanced.” However, he tempered this view with a downward revision of the bank’s inflation projections, based on its view that struggling oil prices will continue to weigh on inflation levels.
The ECB now anticipates inflation levels of 1.5 percent in 2017, 1.3 percent in 2018 and 1.6 percent in 2019. This is down from the forecasts released in March, which saw inflation reaching 1.7 percent in 2017, 1.6 percent in 2018 and 1.7 percent in 2019.
The forecasts remain well below the central bank’s inflation target of below but close to 2 percent, however, they were widely expected following a leak on Wednesday which preempted the plans.
Draghi said the central bank would remain poised to extend its accommodative monetary policy if necessary.
Capital Economics’ chief European economist Jennifer McKeown said ahead of the announcement that the ECB’s announcement was likely to indicate that policy tightening is “a long way off.”
“The only change in the statement is that interest rates are now expected ‘to remain at present levels for an extended period’, rather than ‘at present levels or lower’. This tweak was broadly anticipated and the press conference seems likely to reveal that Council members now see risks to the economy as balanced instead of tilted to the downside,” she added.
Saxo Bank’s John Hardy told CNBC ahead of the announcement that he believed any immediate dip in the euro during Thursday’s meeting would be short-lived, but added that the leak may have been used to prevent a euro rally.
“I think the dovish inflation forecasts that were leaked were a way to avoid the euro rallying – which I think it will eventually in the wake of today’s meeting, even if there is a brief dip because very little new is actually announced,” he noted.
– CNBC’s Silvia Amaro contributed to this report.