The most important takeaway from Mario Draghi's initial remarks today is that he has reiterated the forward guidance that rates will remain this low or lower for an extended period. There was some uncertainty about whether this would happen, given the clear signs of an economic recovery, judging from the PMI data, which Draghi did acknowledge.
Draghi also revealed that the new staff forecasts envision slightly better economic performance than seen in June. The region's economy is expected to contract 0.4% this year rather than 0.6%. Next year's growth is expected to be 1.0% versus 1.1%, which was seen previously. Draghi sees risks to the downside.
Inflation is low and expectations are anchored. The staff see CPI this year at 1.5% versus the 1.4% seen in June. Next year's forecast is unchanged at 1.3%. The risks, he says, of inflation are balanced. He sees the upside risks coming from administrative prices and indirect taxes. Weaker growth poses downside risks.
Euribor futures have firmed and the curve has flattened a bit in the initial response to Draghi's prepared remarks; additionally, the euro has come off about half a cent. Look for initial support near yesterday's low just below $1.3160, but Tuesday's low near $1.3140 may be more important.
This article originally appeared on Behavioral Macro.
See more from Marc Chandler at his blog Marc to Market.
No positions in stocks mentioned.