There were a few different ways to think about the outlook for European Central Bank policy after Thursday’s announcement and press conference. There was the dropped wording from the policy statement that removed the easing bias, and President Mario Draghi’s remarks on the need for ample stimulus.

For the euro, there was only one that really mattered. The staff forecast for inflation next year was cut to 1.4 percent from 1.5 percent.

While a one-tenth of a percentage point reduction may not seem significant, it is. It could be the basis of a delay in the start of interest-rate increases. It is, in effect, a shift in forward guidance.

Market expectations have centered on the ECB’s minus 40 basis point deposit rate being lifted in the early part of next year -- some months after the end of bond buying. It is hard to see how the bank can meet those expectations if the inflation outlook is going in reverse.

Ultimately, that will have a bigger impact on controlling recent gains in the euro than the removal of what President Draghi dismissed as “backward-looking” QE language. At the press conference he emphasized that the ECB “can’t declare victory on inflation” and hammered home the need to maintain “confidence, persistence and patience” on policy.

But for now the top priority for the central bank is about not letting the euro’s strength undermine the the vast amount of stimulus it has provided. The timing was perfect: lowering the staff forecast alongside dropping some redundant dovish terminology negated any real risk to the euro jumping higher. 

Draghi’s remarks on the downside risks to inflation and output from protectionism and trade wars only strengthened his hand. While he can’t control President Donald Trump, he can at least jawbone the euro in the direction he wants.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Marcus Ashworth is a Bloomberg Gadfly columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.

To contact the author of this story: Marcus Ashworth in London at

To contact the editor responsible for this story: Jennifer Ryan at

©2018 Bloomberg L.P.