European Central Bank to decide stimulus move ‘in October’ as euro soars

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The European Central Bank will decide next month on its next stimulus moves, chief Mario Draghi said, as he voiced concern over the recent strength of the euro and its slowing effect on inflation.

The ECB is currently buying 60 billion euros ($72 billion) per month of government and corporate bond purchases as part of its efforts to push up growth and inflation. The 2.3-trillion-euro program, known as “quantitative easing”, is set to run until December, but observers expect it to continue into next year, and markets are eager for clues on when and how the bank plans to begin winding down the scheme.

“This autumn we will decide on the calibration of our policy instruments beyond the end of the year,” Draghi said at a press conference after a meeting of the bank’s governing council in Frankfurt.

“Unless a risk that is not seen today materializes, we should be ready to take the bulk of these decisions in October,” he said. Policymakers would be “taking into account the expected path of inflation”, he added, as consumer prices rises remain stubbornly below the bank’s target of just under 2.0 percent.

The ECB’s slow-motion move away from QE has been complicated by the euro’s rise against the dollar in recent months, with cheaper imports keeping the lid on consumer prices.

“The recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability,” Draghi said at a press conference.

The euro, which has climbed by more than 10 percent against the greenback this year, surged to as high as $1.21 after Draghi’s comments. The ECB also unveiled its latest economic forecasts. It significantly lifted its 2017 growth forecast for the eurozone from 1.9 percent to 2.2 percent.

But it kept its projections for 2018 and 2019 unchanged from June, at 1.8 percent and 1.7 percent respectively. The bank left its 2017 inflation projection unchanged at 1.5 percent but slightly lowered forecasts for the next two years.

Consumer prices are expected to rise by 1.2 percent in 2018, and by 1.5 percent in 2019, said the ECB, shaving 0.1 percentage points off each of the two forecasts.

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