ECB meeting: Dovish tone from ECB board members

After the press conference held by president Draghi, who has a good track record of being ahead of the market, ECB board members (Praet, Constancio, Coeuré) signalled significant dovishness, indicating that the ECB now looks increasingly set to act in December. 

On Tuesday, Praet said that "there is a growing risk that inflation in the eurozone will not return to levels conducive to healthy economic growth by 2017, as initially forecast". The staff inflation forecast for 2017 currently stands at 1.7% on average, which means close to 2.0% by the end of 2017. Praet's comments suggest a downward revision. When the ECB launched QE in March this year, it said QE would help meet the 2.0% target medium term (i.e. in 2017). 

A meaningful change of forecast would be a trigger for action. On Wednesday, ECB vice president Constancio reiterated that the "ECB balance sheet will continue to expand until we see a sustained adjustment in the path of inflation", while Coeuré indicated that downside risks to the inflation outlook may warrant more stimulus. All this suggests that the use of the "vigilant" wording (a key word in the past for imminent key rate changes) was intentional.