ECB President Mario Draghi holds a news conference at the ECB headquarters in Frankfurt. Photo: Reuters/Ralph Orlowski
Italian Prime Minister Mario Draghi, shown here during his tenure as European Central Bank president in 2018, has resigned. Photo: Reuters / Ralph Orlowski

The European Central Bank on Thursday dropped the so-called “easing bias” – language endorsing an option to boost asset-purchases if needed – from its regular statements.

While the step signals movement toward ending the crisis-era quantitative easing program, ECB President Mario Draghi did the bare minimum needed to appease hawks, signaling that record-low interest rates will be unchanged for a while.

“We continue to expect [interest rates] to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases,” Draghi said.

The euro initially rose on Draghi’s comments before paring gains as the press conference went on.

Analysts are divided on the timeline for ending stimulus.

From The Financial Times:

The ECB is expected to call time on buying new bonds under the €2.3tn QE programme later this year, possibly as soon as September. However, it is expected to maintain interest rates at record lows until mid-2019.

From CNBC:

Wolfgang Kiener, senior analyst at BayernLB, told CNBC via email: “Given only a slow increase of core inflation, we expect the ECB to reduce QE from October on to 15 billion euros per month and to stop it altogether at the end of year.”

But Mike Bell, global market strategist at J.P. Morgan Asset Management, said that due to solid economic growth and an expected fall in unemployment across the euro zone, “the ECB are likely to feel comfortable ending QE in September.”

Draghi takes aim at Trump’s tariffs
While the ECB chief said that the immediate impact of expected US tariffs on steel and aluminum imports was “not going to be big,” he warned that “unilateral decisions are dangerous.”

“If you put tariffs against your allies, one wonders who your enemies are,” Draghi said.

David Lamb of FEXCO Corporate Payments answered Draghi’s question, via The Guardian:

The short answer, of course, is everyone. And the ECB chief was keen to stress that starting a trade war is a zero sum game. With no winners, only losers.

[Draghi] also aimed an economist’s barb at the US President – reminding Mr Trump that previous trade wars have typically led to a strengthening of the Dollar.

With US exporters finally reaping the benefits of a softer Greenback, they need a resurgent Dollar like they need a hole in the head.