This week has been big on economic announcements, with multiple statements from the Federal Reserve, and today an important release of the minutes from the European Central Bank’s January meeting.
So far ECB minutes from previous meetings always had a big impact on the exchange rates of the euro. Investors have been hoping for a sign that the ECB might be ready to start easing off of its ambitious economic stimulus program based on good data from all around Europe. However, at each meeting ECB president Mario Draghi tries to calm such sentiments, insisting instead that the stimulus measures will stay in place as long as they are needed, using the fact that inflation is still off the mark. In the past Draghi even tries suggesting extending the stimulus package, but it seems that investors kept ignoring these statements and instead built up more expectations about the single currency, which has strengthened considerably over the past few months.
According to the minutes published just now, the ECB expects inflation to be around 1.5% in 2018, 1.7% in 2019, and 1.8% in 2020. This is a cautious stance and might finally be what discourages investors from expecting the first rate increase in years. The ECB cited as reasons the fact that despite solid economic growth, inflation is lagging behind.
