MNI: Draghi Again Sends Dovish Signal On ECB Monetary Policy

--Inflation Converging Towards Medium Term Aim, But Risks Remain

By Christian Vits

     FRANKFURT (MNI) - European Central Bank President Mario Draghi Wednesday

reiterated the bank's dovish stance on monetary policy as he did after the last

policy meeting on March 8, pointing on economic risks and lagging inflation.

     "We currently see inflation converging towards our aim over the medium

term, and we are more confident than in the past this convergence will come to

pass" Draghi told an ECB-organised conference in Frankfurt. 

     "But we still need to see further evidence that inflation dynamics are

moving in the right direction. So monetary policy will remain patient,

persistent and prudent," he underlined.

     --RISKS REMAIN

     While Draghi also stressed that the economy has been growing consistently

above current estimates of potential growth and more than previously expected,

he explicitly noted two risks for the growth and inflation outlook.

     "The first risk relates to the global environment, and in particular

possible spill overs of the new trade measures announced by the US

administration," Draghi said. The second risk relates to developments in foreign

exchange markets and wider financial markets, he added.

     If they intensify they could reduce the ECB's "confidence in the inflation

path". What's more, the adjustment in inflation has to be self-sustained even

without additional net asset purchases, Draghi stressed.

     Offering little new to the ECB Watchers gathered to hear him speak, Draghi

underlined the fact the ECB remains very cautious before further adjusting its

monetary policy. The bank will conduct monthly asset purchases of E30 billion

until September -- and some observers expect a possible extension until the end

of the year, although at a slower pace.

     Once again, Draghi noted possible risks stemming from financial markets and

he mentioned the equity market turbulence in February. He said that the spill

over to other asset classes had been moderate.

     Still, "should there be any further sharp re-pricing in financial markets,

we will need to monitor the consequences carefully," Draghi said.

--MNI Frankfurt Bureau; +49 69 97782671; email: christian.vits@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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