ECB Takeaways: What Does a Stronger Euro Mean?

Mario Draghi entered his first news conference of 2018 facing a challenge: somehow talking down prospects of a more rapid removal of stimulus, while acknowledging that the eurozone economy has been doing a lot better than the European Central Bank had expected it would.

Mr. Draghi dwelt at length on the potential impact of the stronger euro on inflation, suggesting it may prolong the need for stimulus. But in the end, investors and traders were unpersuaded. Here are five takeaways from a punchy performance.

Mnuchin

Mr. Draghi made it clear that he wasn't at all happy with what he saw as U.S. Treasury Secretary Steven Mnuchin's attempt to talk down the U.S. dollar in comments made Wednesday, accusing him of breaking a longstanding agreement designed to prevent currency wars.

Monitoring

Before directing his ire at Mr. Mnuchin, the ECB president made a rare change to his opening statement to communicate to financial markets that policy makers are "monitoring" the euro's movements, a central banker's way of suggesting that the currency is a source of concern without being seen to be trying too hard talk it down. The euro rose.

No Rate Increase

It didn't come as a great surprise to anyone, but Mr. Draghi all but ruled out a possible interest rate rise this year.

Guidance

The minutes of the ECB's December meeting appeared to suggest Mr. Draghi had been at his last news conference in telling reporters that policy makers hadn't discussed a change in forward guidance. He clarified the matter by explaining that "the only discussion that took place was about the need to have a discussion." And that remains the case.

Debt

Mr. Draghi urged eurozone governments to use the improved economic situation to reduce their debts, pointing out that the good times won't last forever, and when bad times come "governments will want to have policy space."

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

January 25, 2018 12:06 ET (17:06 GMT)