Draghi Likely to Rely on the Power of his Words

Mario Draghi is likely to rely on the power of his voice rather than new policies to steer Europe’s banks through the early stages of an economic recovery.

The ECB president will hold off from pumping more cash into the currency bloc’s financial system as long as the threat of action keeps market interest rates under control, according to economists from Berenberg Bank to Nomura International Plc. While Draghi put investors on notice last week that a long-term refinancing operation is possible, other policy makers have played down the likelihood of that for now.

“Communication has clearly been the ECB’s preferred tool for the past few months and it still is,” said Christian Schulz, senior economist at Berenberg in London. “Draghi will keep using words rather than deeds. He will say that more long-term loans are still on the table and he may even hint at another LTRO being deployed by the end of the year, but I don’t expect any policy action today.”


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.