The Daily Update - Draghi inflation warning

Yesterday Mario Draghi, the ECB President said he believed that the slack in the Eurozone economy may be bigger than previously thought and could drag on inflation in the near to medium term. Draghi does believe that prices and inflation will eventually rise as the factors slowing inflation start to diminish, however ‘patience and persistence’ in the Eurozone’s monetary policy is required to help raise inflation back to target levels. ‘Given the uncertainty surrounding the measurement of economic slack, the true amount may be larger than estimated, which could slow down the emergence of price pressures’, warning that ‘This is particularly visible in the labour market’.

As it stands, the ECB's asset purchase program, which began three years ago, has seen the central bank purchase over USD3tn of financial assets and government bonds. At the start of this year the ECB reduced the monthly purchase amount from EUR60bn to EUR30bn, whilst stating that the purchases will continue at least through September, and longer if necessary.

Also Draghi told lawmakers that he believes that the EU should use Brexit as a factor in gaining additional powers over central clearing houses (CCP). He warned that the ECB would be forced to  prop up a stressed CCP if financial companies encountered ‘liquidity strains’, and this would have a knock-on effect on monetary policy. ‘Several CCPs clearing significant volumes of euro-denominated business will be operating outside the framework of EU regulation and the safeguards this provides if Britain leaves the bloc without a suitable exit deal’. If this was to be the case Draghi warns that ‘Under crisis conditions, the disruption of clearing activities can have a significant negative impact on our ability to conduct monetary policy tasks’.

Please read this important information before proceeding. It contains legal and regulatory notices relevant to the information on this site.

This website provides information about Stratton Street Capital LLP ("Stratton Street"). Stratton Street is authorised and regulated by the UK's Financial Conduct Authority. The content of this website has been prepared by Stratton Street from its records and is believed to be accurate but we do not accept any liability or responsibility in respect of the information of any views expressed herein. The information, material and content provided in the pages of this website may be changed at any time by us. Information on this website may be out of date and may not be updated or removed.

The website is provided for the main purpose of providing generic information on Stratton Street and on our investment philosophy for the use of financial professionals in the United Kingdom that qualify as Professional Clients or Eligible Counterparties under the rules of the United Kingdom Financial Conduct Authority (the "FCA"). The information in this website is not intended for the use of and should not be relied on by any person who would qualify as a Retail Client. Products and services referred to on this website are offered only at times when, and in jurisdictions where, they may be lawfully offered. The information on this website is not directed to any person in the United States. The provision of the information on this website does not constitute an offer to purchase securities to any person in the United States (other than a professional fiduciary acting for the account of a non-U.S person) or to any U.S. person as such term is defined under the Securities Act of 1933, as amended.

The website is not intended to offer investors the opportunity to invest in any Alternative Investment Fund ("AIF") product. The AIFs managed by Stratton Street are not being marketed in the European Economic Area ("EEA") and any eligible potential investor from the EEA who wishes to obtain information on the AIFs will only be provided with materials upon receipt by Stratton Street of an appropriate reverse solicitation request in accordance with the requirements of the EU Alternative Investment Fund Managers Directive ("AIFMD") and national law in their home jurisdiction. By proceeding you confirm that you are not accessing this website in the context of a potential investment by an EEA investor in the AIFs managed by Stratton Street and that you have read, understood and agree to these terms.

No information contained in this website should be deemed to constitute the provision of financial, investment or other professional advice in any way. The website should not be relied upon as including sufficient information to support any investment decision. If you are in doubt as to the appropriate course of action we recommend that you consult your own independent financial adviser, stockbroker, solicitor, accountant or other professional adviser. Past performance is not necessarily a guide to the future. The value of investments and the income from them may go down as well as up. An application for any investment or service referred to on this site may only be made on the basis of the offer document, key features, prospectus or other applicable terms relating to the specific investment or service.

Where we provide hypertext links to other locations on the Internet, we do so for information purposes only. We are not responsible for the content of any other websites or pages linked to or linking to this website. We have not verified the content of any such websites. Such websites may contain products and services that are not authorised in your jurisdiction. Following links to any other websites or pages shall be at your own risk and we shall not be responsible or liable for any damages or in other way in connection with linking.

By using this site, you should be aware that we may disclose any information that we hold about you to any regulatory authority to which we are subject, or to any person legally empowered to require such information.

This website uses cookies to improve user experience, by clicking the "I Accept" button below means you consent to the use of cookies on our website.