The ECB left rates and the asset purchase target unchanged at their September monetary policy meeting.

The meeting was accompanied by the ECB staff macroeconomic projections, which showed a marginal reduction in the growth forecast versus the projections released in June. Real GDP growth in 2018 was lowered to 2% from 2.1%, in 2019 to 1.8% from 1.9% and in 2020 left unchanged at 1.7%. The risks to this forecast remain “broadly balanced” as communicated in previous policy meetings.

On the inflation front, the headline Harmonised Index of Consumer Prices (HICP) forecast was left unchanged at 1.7% until the end of 2020. Underlying this was weak oil prices being offset by “significantly stronger” core inflation driven by rising wages.

There was no discussion on reinvestment of the asset purchase programme redemptions, with Draghi suggesting that the likely date for this would be October or December.

The worries in Italy, Argentina and Turkey were, in Draghi’s view, reflective of weak fundamentals and as such contagion has been limited, with Italy viewed as an “Italian episode”.

Rates markets rallied however this is more likely reflective of the lower than forecast inflation number out of the US, released at the same time as the press conference.

All in all, no material information and we continue on the ECB glide path.

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