The ECB switches to a "very accommodating" monetary policy
With three months to go before Mario Draghi's term as head of the ECB comes to an end, the central bank had an appointment on July 25 for what is undoubtedly one of the most uncertain meetings in several quarters. The economic slowdown in Europe and the mess resulting from the trade war started by the Donald Trump are redistributing cards again. So much so that the institution is forced to react vigorously.
The Governing Council also stressed the need to adopt a "very accommodating" bias for an extended period of time and stands ready to "adjust all its instruments" to ensure that inflation will tend towards the target in a sustainable way. It also mandated the bank's committees to examine several options to achieve its objectives. In particular, the possibility of "tiering", a system of degressive rates, already in force elsewhere and which would make it possible not to penalize commercial banks overseas.
"It now seems more obvious that the September meeting will not be the scene of the announcement of a single measure, but of a package of measures," says ING economist Carsten Brzeski after the decision. Three key elements have changed in communication, says the specialist. First, the mention of lower rates. Then, the introduction of new terms such as the commitment to act if inflation continues to miss the target, or the mention of the possibility of adjustment of "all instruments". Finally, the ECB used the "magic words", according to Brzeski: the examination of different EQ options by the internal committees. Even before the press conference, "it is clear that today's meeting was the last stop with new ECB action".