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After the ECB left the rates unchanged once again, Mario Draghi took the stage to discuss the current situation. Draghi basically offered no support:  he passed the ball to the governments’ court, as expected. He rejected an option for more LTROs and offered no hint of a rate cut for July.

Draghi also said that a decision for a fiscal union will not be answered will not be rewarded by action from the ECB. The ECB is the most powerful factor around. If it is not willing to act for the euro, the euro cannot hold up.Live blog of the event.


  • Uncertainty high.  Growth projections haven’t changed: Q2 seems weak but Q1 was quite good, citing German growth.
  • Some members wanted a rate cut, but not many.
  • No hints for July, only “ready to act”.
  • Governments should continue austerity.
  • EUR/USD lower.
  • No new LTROs – not a substitute to other institutions’ actions.
  • No “horse trading” with politicians on fiscal union decisions.
  • Markets underestimate political will and benefits of the euro.

Live Blog

12:00 GMT EUR/USD ticks below 1.25 before the event. All times are GMT. Press conference begins at 12:30. You can watch it here.

12:02 The decision and the accompanying presser are usually scheduled for Thursday.

12:10 Some expect Draghi to hint about a rate cut next month. EUR/USD falls in the meantime to 1.2484.

12:24 Normally, rate cuts or hints of cuts weaken the currency, while hikes or hints of hikes push them up. In the current state of the euro debt crisis, anything that will keep the wheels moving will be welcomed by the euro.

12:30 Press conference begins. Growth remains weak. Increased economic risk – EUR/USD falls.

12:31 Inflation remains anchored. Current refinancing operations continue.

12:32 EUR/USD choppy at 1.2480. Q1 GDP was flat.

12:33 Weaker growth in Q2. Still expects economy to recover gradually. Tensions in some countries, high unemployment and other factors dampen the momentum.

12:34 0-2% growth in 2013, and -0.5% to 0.3% in 2012 – unchanged.

12:34 Increased downside risks due to tensions. Downside risk also relate to commodity prices. EUR/USD falls under 1.2480.

12:35 Inflation is a bit lower – likely to remain above 2% in 2012. Price pressures to remain subdued. Projections are for 2.3%-2.5% in 2012, and 1-2.2% for 2013. Ranges are narrower. Indirect taxes and commodity prices could push inflation higher. Weaker than expected growth is downside risk.

12:36 M3 Growth fell after a strong Q1. EUR/USD falls to 1.2460.

12:37 Necessary for banks to stabilize themselves.

12:38 Significant progress has been made with fiscal consolidation over recent years. It is important to continue and also improve competitiveness. In some countries, imbalances exit and should be corrected.

12:40 Draghi discusses reforms and adjustments – passing the ball to governments as expected.

12:41  Draghi pauses before the questions. EUR/USD takes the time to dive. 1.2460 provides support for now.

12:42  Question: “Almost panic mode – why not cut rates? We still have dysfunctional markets, monetary policy is still very loose at the moment.

12:44 PMI, orders and others were soft. Everything was soft in Q2, but Q1 was very good. Draghi mentions strong GDP growth in Germany in Q1. Policy directed to Germany?

12:45 “We stand ready to act” – hint for rate cut? Not exactly. EUR/USD stabilized above 1.2460.

12:46 Decision was taken by “very broad consensus” – not unanimous. The situation in Europe is quite complex.

12:47 LTROs have prevented other problems, a more serious credit crunch, a destruction of the banking sector. Many of the stress indicators are still slightly better than in November.

12:48 Fragmentation is very high – some areas have high liquidity, others don’t, and monetary policy isn’t to blame – other institutions should act.

12:49 Draghi no longer talks about the the LTROs with the word “success”.

12:50 EUR/USD falls to 1.2450.

12:52 Regarding Spain, it is not the ECB’s task to push countries into decision (regarding the bailout). The first assessment will be available on Friday by the IMF.

12:54 Any decision should be based on realistic assessments.

12:55  Does the referendum in Ireland justify debt relief? Draghi smiles and welcomes the result of the referendum.

12:56  Regarding debt relief, there is no ground for a prize for Ireland on this.

12:57 ECB will not contribute to a decision on fiscal union with help – “no horse trading”. EUR/USD is below 1.2450.

12:59 Fiscal consolidation needs to be refocused towards infrastructure and human capital.

13:02 Ireland could return to the markets sooner than expected.

13:04 One off factors pushed prices higher.

13:05 Inflation expectations are firmly anchored. No secondary round effects.

13:07 Market factors are “overreacting” around euro debt crisis by setting deadlines.

13:08 The market underestimates the extraordinary benefits of the euro: in economic and political terms. They are not wrong to be worried about the current situation.

13:10 Concern is true but can be coped with.

13:11 A few members wanted a rate cut. Not many.

13:13 Q: What about the SMP? No answer.

13:16 LTROs so significant and so complex that the effect has not been exhausted. No pre-commitment.

13:18 EUR/USD now recovering to 1.2465.

13:19 Draghi clarifies that the “the worst is over” statement and clarifies that he also said that there are downside risks.

13:20 Both loan components are positive for the first time.

13:21 What about negative global effects of the euro-area crisis. Answer: there are problems everywhere.

13:23 EUR/USD rises to 1.2470.

13:25 The situation is not like after Lehman Brothers. It took us time to understand and how to manage it. It’s different now: we now know what to do…

13:26 The ESM treaty forbids recapitalizing banks. Would it be better to change it? Yes and no. Draghi asks if we want the ESM to become a shareholder in banks?

13:33 Press conference ends: EUR/USD is slightly higher than it fell to.


This rate decision comes after quite a few economic indicators have soured: forward looking purchase managers’ indicators fell. The amount of money in circulation has also squeezed.

In addition, the Greek elections in early May also hurt the economic sentiment, and some bad figures for May are still awaiting us. In Spain, the government is the only institution that is able to borrow, and at very high costs.

A bailout for Spain or the banking system is now widely discussed: there are at least 4 options for this bailout.