FXStreet (Delhi) – Elwin de Groot, Senior Eurozone Strategist at Rabobank, notes that Draghi tried to give a positive spin to the press conference, arguing that it would take some time for the impact of these measures(such as the decision to reinvest the principal payments of bonds under the program) to sink in. Key Quotes “But he also gave the impression that the ECB may be less concerned about the downside risks to growth and inflation. For suddenly, the emphasis seems to be back on the positive effect of lower commodity prices on consumption – a factor we have highlighted for a long time – and this issue has likely been expounded by the more hawkish members in the Council.” “At the same time, Draghi’s story line was that the Governing Council believes that its policy measures are effective and still working their way through the economy. And that the fresh measures would only strengthen this impact. But we felt that his explanations weren’t as convincing as they usually are. A “lower correlation between inflation expectations and commodity prices” does not sound particularly powerful, as far as we are concerned.” “So, a more negative interpretation of Draghi’s comments on the “effectiveness” of the ECB’s policy measures therefore is that the Council (or at least some influential members) are not that much impressed by the measures at all and/or have reservations about raising the monthly purchases by a sizeable amount.” “The latter was of course the main reason why markets sold off: no change in that important parameter of the program. The fact that regional and local government debt will be added to the PSPP shopping list also clearly hints at the possibility that they have identified future scarcity issues in the program, bearing in mind the 6 month extension of the program as announced today. Although Draghi emphasized again that the APP “provides sufficient flexibility in terms of adjusting its size, composition and duration”, the weight of these words could well be seen in a different light as from today.” “That the ECB has refrained from more radical measures (such as changing the conditionalities of the PSPP and/or introducing a staggered deposit rate regime) is also a confirmation that political sensitivities will likely prevent them from doing so in the future. In that sense, it would seem the hawks have clearly taken over the steering wheel.” For more information, read our latest forex news.