Economy

United States stocks keep climbing, euro jumps after Draghi

United States stocks keep climbing, euro jumps after Draghi

European Central Bank policymakers were unanimous in choosing not to change their guidance for monetary policy and not to set a date for discussing changes to its stimulus programme, ECB President Mario Draghi said on Thursday.

European Central Bank taper watch: Investors will be waiting to hear what the European Central Bank intends for its program of bond buying beyond December - whether it will scale it down in 2018 for an eventual wind-down.

The reason why little is expected right now: Draghi and top bank officials want to avoid a sudden market reaction that could prematurely send business and government borrowing costs higher before the phase-out starts. The reason is because there is nothing new from today's meeting, the European Central Bank statement is virtually unchanged from last time and no news means no change in the euro's trend, which is higher, ' said Kathleen Brooks, research director at City Index.

"Headline inflation is dampened by the weakness in energy prices", Draghi said in his introductory statement to the post-decision press conference.

Commerzbank described the speech as the "beginning of the end" of quantitative easing (QE) in the euro zone, noting that the rise in German yields was in line with the rise seen in U.S. Treasury yields in the weeks after the U.S. Fed signalled an unwinding of its QE programme in May 2013 in what became known as the "taper tantrum".

The ECB's monetary policymakers left interest rates and asset purchases unchanged at its latest meeting in Frankfurt today, but markets responded to Draghi's hint of tightening to send the euro above $1.157 against the USA dollar after earlier falling to nearly $1.148.

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Analysts have been expecting the ECB to give a clearer sign at the September 7 meeting of when it might start decreasing its 60 billion euros ($69 million) in bond purchases, which are aimed at raising inflation from 1.3 percent toward the bank's goal of just under 2 percent.

"We need to be persistent and patient because we aren't there yet", he told a news conference.

While most economists have been expecting the bank to move towards a cut, it was not expected to come quite so soon. He could hardly walk back the ECB's underlying confidence that the factors holding down inflation would eventually fade, provided the economy maintains its momentum.

The bank's quantitive easing and low interest rates were created to fend off deflation.

If a rate is negative the bank will pay the ECB (rather than receiving money in interest).

"There's always risk" surrounding the central bank's possible signals, Anderson said.


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