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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 04 September 2014 at 13:15 GMT

ECB's Draghi revises down inflation forecast for 2014 to 0.6%

Former managing editor, TradingFloor.com / Saxo Bank
Denmark
  • ECB cuts main financing rate to 0.05% from 0.15%
  • Draghi cuts inflation forecast for 2014 to 0.6% from 0.7%
  • Decision to cut rates was "not unanimous"

By Martin O'Rourke

European Central Bank president Mario Draghi followed the central bank's decision to cut the main financing rate from 0.15% to 0.05% Thursday by announcing the start of asset-backed securities purchases from October 2014.

Draghi said that the purchases would have a sizeable impact on the balance sheet indicating the bank decided to take action after a disappointing second quarter GDP for the Eurozone.

Draghi said markets should not "expect any further lowering of rates".

Draghi also revised down the inflation rate forecast for 2014 from 0.7% to 0.6% reviving deflationary fears that have stalked the Eurozone for much of the last year.

He also readjusted Eurozone GDP growth forecasts down for 2014, 2015 and 2016 respectively to 0.9%, 1.6% and 1.9%.

Draghi said the raft of decisions taken at the meeting which included a cut to the main financing rate was "not unanimous", adding that "some [ECB members] wanted to do less".

Markets reacted positively to Draghi's speech with the FTSE, CAC40 and DAX all trading up during the conference. The euro struggled against both the dollar and sterling and also hit its lowest level against the Swiss franc since November 2012.

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Draghi: Markets should not "expect any further lowering of rates". Photo: Thinkstock

Martin O'Rourke is managing editor of TradingFloor.com
5y
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