The ECB left rates unchanged this week but the real interest came from a rather irritable Mario Draghi in the press conference afterwards. Here’s what we learned:

Inflation Could Turn Negative Again

 

“Inflation rates could turn negative in the coming months” before picking up later in the year, Draghi told the assembled reporters in Frankfurt.

The message is backed up by the markets – 5-year 5-year inflation swaps, the most commonly used gauge of inflation expectations, are down close to record lows seen in March.

Not talked about helicopter money

 

What helicopter money? Draghi played down any suggestions that the ECB is eyeing dropping money from the sky. It’s been a hot topic and investors increasingly fret over what weapons are left to central banks in a world of negative rates. But we can now only presume the questions about helicopter money will intensify – Draghi only said it had not been discussed, not that it was off the table completely.

Ready to act again

 

As ever, Super Mario stands ready to act if required. Whatever it takes is still in play. Only for the moment, he doesn’t think that any further action is needed. It’s a case of implementing the new measures set out in March and waiting to see – and Draghi suggested the ECB is happy to wait for quite a while.

Other oft-repeated statements were that the exchange rate is not a policy target and that negative rates have not hurt banks’ profits.

Be patient

 

There is a clear sense that Draghi wants to hold fire on anything too drastic and is happy to play the hand dealt in March. Negative rates are broadly positive, he insisted – if markets would only give them more time. “The bottom line is these policies are necessary for return of the inflation rate to the objective,” he said.

Critics answered

 

Draghi had a couple of choice words for politicians, particularly those in Germany who may have sought to undermine the ECB in recent weeks. He said that the ECB has a mandate for the whole Eurozone, not just Germany. He also said the bank obeys the law, not politicians.

But he also had some broader criticism for politicians across the Eurozone by saying that monetary policy would work quicker if there were also structural reforms.

More emphasis on structural reforms

 

Draghi may be losing patience with European governments – hardly surprising given some of the accusations aimed his way of late.

He said: “Not only is monetary policy a necessary condition for returning to structural long-term sustainable growth but then you have to have other conditions, first and foremost is structural reforms.”

“That's why the introductory statement today receives renewed emphasis on structural reforms, which by the way was highlighted in the last IMF meetings.”

 

Brexit won’t harm euro area

 

At least that was the general tone from Draghi as he largely batted away a question about what Britain leaving the EU would mean for the eurozone’s recovery.

Draghi wouldn’t speculate on the outcome of the June 23rd poll but he did say the ECB thinks any risks to the Eurozone are “limited”.