Today’s ECB press conference did not bring major news. The Governing Council refrained from providing fresh monetary signals and from tweaking the language of its policy guidance concerning policy rates, QE and the reinvestment strategy.

The only dovish change to the statement compared to the September one was the omission of the reference that “uncertainty around the inflation outlook is receding”. But in the press conference Draghi reiterated that inflationary pressures are building up and inflation will eventually converge to target. In particular, he highlighted that high levels of capacity utilization and tightening labour markets are pushing up negotiated wages with a lasting impact on domestic prices.

Despite the growing market turbulence generated by factors originating primarily from outside the eurozone (and only to a lesser extent from within), the ECB confirmed that risks to the macroeconomic outlook are “broadly balanced”. During the Q&A, Draghi elaborated more on this point. He stated that there are no signs of a “downturn”, but just of a “weaker momentum”, arguing that a more thorough assessment will take place at the December meeting when the new staff macroeconomic forecast will become available. He acknowledged, however, that uncertainty caused by trade protectionism, Italy’s budget standoff and Brexit is clouding the horizon. On the upside, he highlighted that financial tensions in some emerging markets are receding, while in the eurozone private consumption remains solid and fiscal policy remains supportive in some countries. In our view, he downplayed the message that came from yesterday’s PMIs for October that showed how export orders in the eurozone have crossed the critical threshold of 50, entering contractionary territory. He simply stated that the export performance has shifted from “exceptional” to “normal”.

The GC did not discuss its reinvestment strategy that will likely be the focus of the December meeting (when the updated macroeconomic forecast will be available). Draghi only confirmed that capital keys will continue to be an anchor for ECB reinvestments even when net asset purchases will stop, but he refrained from stating whether the updated set of capital keys will be used in the future.