Euro slides after European Central Bank hints at no hawkish shift at Jackson Hole


European Central Bank policymakers anxious about a possible overshoot in the euro when they met on July 20, warning that easy financing conditions "could not be taken for granted" and depended on the ECB's easy policy, minutes of the meeting showed on Thursday.

The policymakers also said the duration and pace of the ECB's 2.3 trillion euros bond-buying programme were not the only available levers to adjust their stance and "more policy space" was needed "in either direction".

Draghi, who has blamed the inflation undershoot on external factors, had been expected to give his thoughts on policy at the Kansas City Fed's three-day economic policy symposium at Jackson Hole, Wyoming, that begins next Thursday but reports yesterday said he would not in fact give any steers on policy there.

"A suggestion was made that some consideration be given to an incremental adjustment in the language on forward guidance", the minutes said.

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"Postponing an adjustment for too long could give rise to a misalignment between the Governing Council's communication and its assessment of the state of the economy, which could trigger more pronounced volatility in financial markets when communication eventually had to shift", according to the account.

Many commentators have argued that it was only a matter of time before the European Central Bank pushed back on Euro strength but it appears the markets were a little more sanguine to this threat.

Indeed, the economy is picking up pace with employment falling and wages rising.

Officials remarked on a lack of conclusive evidence that underlying inflation is on a sustained upward trend, even though there are some tentative signs of a pickup. "In this context, it was also suggested that the stock versus flow effects of the asset purchases be considered". Economists surveyed by Bloomberg predict a nine-month tapering to start in January. The meeting was the first since he told an ECB conference in Sintra on June 27 that reflationary forces were at play in the euro area, arguing that a continued recovery would allow the central bank to scale back stimulus.