In his press conference following the European Central Bank meeting yesterday, Mario Draghi signaled that officials are ready to cut interest rates next month and expressed concern about the Euro's strength. Speculation has been growing for some time over what the ECB’s next move would be, although most believed it would be stimulative.
Economic growth remains stagnant at 1.1% Y/Y and falling CPI has boosted real interest rates, contributing to the deflationary environment. Interest rates in the Eurozone are already hovering near the zero-bound at 0.25%, so the ECB has little room to cut rates.
Eurozone CPI Y/Y (orange) – Eurozone GDP Y/Y (white)