Kathleen Brooks of City Index says Mario Draghi has proved he was the “king of curveballs” at today’s press conference in Frankfurt.

After delivering what was arguably a dovish statement early on in his press conference, and clearly stating that for the ECB’s GDP and inflation forecasts are conditional on the implementation “of all our policy measures”, Draghi displayed a more hawkish tone during the Q&A.

The key takeaway from this month’s ECB meeting appears contradictory: QE is here to stay in the Eurozone, until at least the end of this year. However, more policy action is less likely because deflation risks have receded. Reading between the lines suggests that the next change from the ECB will be towards removing accommodation and not adding it.

Aberdeen Asset Management investment manager Patrick O’Donnell says Draghi has given a small hint that the ECB could adjust its policy stance soon:

“Draghi has ever so slightly opened the door to changing their policy stance. He’s done this by saying that the Governing Council talked about changing the language about where rates are in their monthly statement, but didn’t actually change it. This is effectively him signalling that something might change in the future, just not today.

“It’s a classic Draghi technique of saying something that will move markets without actually doing anything. Due to this, and a wordy response to a question about raising rates before QE ends, markets will now start to recalibrate on the assumption that the ECB will remove accommodation towards the end of the year.”

Jamie Dutta, senior market analyst at Faraday Research, says the ECB president “flip-flopped’ between his bearish opening statement, and some bullish remarks in the press conference.

The ECB and Mario Draghi celebrated its two year anniversary of its Asset Purchase Program by being marginally less dovish than expected in the monthly press conference. It was an interesting balancing act for Draghi between unchanged monetary policy stimulus policies and improved economic prospects. The market took the upgraded forecasts for growth and inflation in its stride.

However they reacted more positively when Draghi stated that there was no longer a ‘sense of urgency on taking further actions’ to boost inflation and the recovery. Indeed Draghi further said the ‘risks to deflation have largely disappeared’.

And Pictet’s Frederik Ducrozet shows how the ECB has raised its forecasts for inflation in 2017 and 2018:

The press conference ends with Mario Draghi insisting that the euro is irrevocable, and not going to break up.

The ECB president declares that:

The euro is here to stay. It’s not about whether or not it is irrevocable. It is.

The ECB president calls the euro a “channel for solidarity” (which might rankle with those suffering financial plight in Greece).

Draghi points out that Latvia, Estonia and Lithuania all joined the single currency since the financial crisis began, due to the benefits of membership.

We need to make monetary union function better, Draghi adds, to increase prosperity in the region.

And this bullish talk has helped to push the euro up. It’s currently up 0.6% at $1.06.

In a hawkish move, the European central bank has dropped an important line from its statement.

The pledge to use “all the instruments at its disposal” if necessary to achieve it mandates has been removed.

Mario Draghi says this has been dropped because the “sense of urgency” has gone, suggesting the ECB is less worried about the situation.

Hello again. Sorry about that breakdown - while I was away, Mario Draghi has been speaking to the press in Frankfurt.

The ECB president has announced slightly higher growth forecasts; GDP is now expected to rise by 1.8% in 2017 (up from 1.7% in December) and by 1.6% in 2018 (up from 1.5%)

It has also raised its inflation forecast this year to 1.7% (from 1.3%).

Draghi still sound cautious, saying:

The risks surrounding the euro area growth outlook have become less pronounced, but remain tilted to the downside and relate predominantly to global factors.

Markus Ferber, a German conservative MEP, is unhappy that the European Central Bank didn’t raise interest rates today.

Ferber argues that the ECB should have responded to the recent rise in euro area inflation, to 2%.

“The inflation rate is picking up and the European economy is growing strongly. Now would be the perfect time for Mario Draghi to show a little courage and end the period of zero interest rate. The craving for cheap money is like an addiction that has to stop now. This is even more so as monetary policy in the USA and the EU are at risk of drifting further and further apart.

In the US, the main interest rate is already higher than in the Eurozone and the Federal Reserve plans to have two to three additional interest rate hikes this year alone. I am disappointed that the ECB missed yet another chance to initialise a normalisation of monetary policy.“

The European Central Bank has also declared it will keep running its stimulus programme.

And despite pressure from hawks to start tightening, the ECB insists it could boost its bond-buying firepower if needed.

The ECB says: :

Regarding non-standard monetary policy measures, the Governing Council confirms that it will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of this month and that, from April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.

Here we go! The European Central Bank has left interest rates unchanged at today’s meeting, and kept its pledge to cut them again in future if needed.

That means that borrowing costs stay at their current record lows, despite inflation jumping to 2% this month.

So:

• the main rate sticks at 0.0%
  
• The deposit facility rate stays at -0.4% (meaning commercial banks will be charged for leaving funds at the ECB).
  
• The marginal lending rate, charged when banks borrow from the ECB, stays at 0.25%

There’s no change to the commitment to keep borrowing costs low, either. The ECB says:

The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.

It’s nearly time for the European Central Bank to end the suspense (!) and reveal the results of today’s governing council meeting, at 12.45 GMT (1.45pm in Frankfurt)

We’re not expecting any changes to interest rates, but the ECB easily change the language in today’s announcement.

That could include dropping the suggestion that interest rates could be cut to new record lows, or that it stands ready to boost its bond-buying programme.

Nick Kounis of ABN Amro explains:

ECB expert Fred Ducrozet of Pictet Bank predicts that Mario Draghi will make some subtle changes to his statement at 1.30pm GMT (2.30pm Frankfurt time).

Fred also expects the ECB to raise its forecasts for growth and inflation this year.

In London the FTSE 100 index is now down 50 points, or 0.6%, at 7283, and on track for its sixth loss in a row.

Oil companies have now joined the big fallers, with Shell down 3% following the drop in the crude price. Mining stocks are being hit hard too.

There’s a generally nervous mood in the markets, as the rally that begin after the US election fades.

Chris Beauchamp of IG sums up the mood:

Signs of a broad-based risk off mentality are cropping up like spring daffodils at present. Yesterday’s plunge in oil prices took most of the attention, but the other major warning signal was the rout in junk bonds; like stocks these have gained significantly since the election, and like stocks they enjoyed more gains in February. The heavy selling in the high yield ETF over the past week sounds another alarm for equity bulls.

To add to the signs of doom, mining shares in London are in full-blown retreat, as a stronger dollar and falling commodity prices take their toll

The German banking industry has urged the European Central Bank to give a signal today that it could start unwinding its ultra-loose monetary policy stance soon.

Reuters has the story:

The BdB private banking association said the fact that the threat of deflation has disappeared in the euro zone and inflation was picking up justified its recommendation.

“Such a step must be prepared very, very well” and policymakers should communicate it carefully, BdB head Michael Kemmer told Deutschlandfunk radio on Thursday.

“But it would be important, I think, that the ECB today opens the door to the exit (of its expansive monetary policy),” Kemmer said.

How would that door open?

One option is that the ECB could drop its pledge that interest rates would remain at current or lower levels for an extended period.

Or, Mario Draghi could outline how it would slow (or taper) its QE programme.

But as flagged earlier, many analysts think there are good reasons to leave the exit door locked.

Neil Wilson of ETX Capital says:

Draghi doesn’t want a repeat of 2011 or 2008, when the ECB tightened too quickly. This fear is likely to drive policymakers to remain dovish and keep the taps open. The risks remain to the downside - even with what markets consider ‘too much’ QE.

The ‘high class problem’ talked about by Draghi is that the European economy is doing better and the talk is now of tightening. The longer the ECB is minded to refrain from changing policy, the more markets will expect a rate rise or tapering to come. Indeed markets are doing a lot of the tightening work for the ECB as the front end of the yield curve is rising.

Newsflash: The price of US crude oil has suddenly taken a tumble, dropping below $50 per barrel for the first time since December 2016.

Traders are blaming figures, released yesterday, which showed a surge in US crude oil stocks. That caused a 5% drop in the oil price yesterday, and it looks like people are still worried...

Brent crude has also fallen, by over 5% to around $52.11 per barrel.

Several experts are arguing that the European Central Bank should ignore calls to start winding back its stimulus programme.

Guntram Wolff of the Bruegel thinktank says underlying inflationary pressures are still too weak:

Kathleen Brooks of City Index predicts that the ECB won’t start to dial back its bond-buying programme until the autumn.

We seem to have entered a post-inflation era for central bankers, who used to try and prevent price pressures from building. Now we tend to see a willingness for central banks, including the Bank of England, the ECB and, to a smaller extent, the Federal Reserve, to look through periods of high inflation in order to protect growth. Thus, the fact that headline CPI reached 2% is unlikely to deter the ECB from keeping rates in negative territory and maintaining asset purchases, potentially into 2018. We do expect the ECB to revise up its long-term inflation forecast at tomorrow’s meeting, which could trigger some euro buying as the market anticipates a premature end to the ECB’s QE programme.

We also don’t expect the ECB to announce any plans to taper its asset purchases any time soon. Firstly, growth in the region remains uneven, for example, the Greek economy contracted sharply at the end of 2016, Finnish growth was flat and Italy could only muster growth of 1%. These are economies that need support from their central bank, and even the German finance minister in a recent speech noted that the ECB was doing a good job to balance policy for all Eurozone members. We think that the ECB is approx. 6-months away from announcing a taper to its QE programme.

Kit Juckes of Societe Generale predicts a ‘straight bat’ from president Draghi:

No policy change is expected....Mario Draghi will acknowledge the better economic backdrop and higher inflation, but avoid any watering-down of the dovish bias.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The European Central Bank’s governing council may have a spring in its step today, as policymakers gather for their latest policy meeting in Frankfurt.

After years of low inflation, the consumer prices index is finally back on target at 2% - meaning that fears of a deflationary spiral can be put to bed.

But the ECB still has a problem; what to do about its massive stimulus programme that is pumping billions of euros into the eurozone each month?

Hawkish members of the ECB will be putting pressure on president Mario Draghi to start the process of winding back its bond-buying QE programme.

They’d also like Draghi to signal that the interest rates could rise, having been slashed to record lows of zero (or lower, for banks who leave money in the ECB’s vaults).

Here’s the timings:

• 12.45pm GMT: ECB announce its decision on interest rates and QE
  
• 1.30pm GMT: Mario Draghi press conference
  

The markets aren’t expecting any new measures today; but the key, as so often with Draghi, is the language he uses.

Analysts at RBC Capital Markets explain:

The market will be watching for any changes to the ECB’s language today, particularly whether it may drop its current bias toward lower interest rates which would likely be interpreted as a potential signal that the period of ultra-accommodative monetary policy is coming to an end, even if the ECB is still someway from signalling a readiness to raise rates. Our view is that the Governing Council will keep its forward guidance language as is for the time being pointing to the continued weakness of core inflation as justification.

The ECB will also issue new staff forecasts on growth and inflation; these are likely to be revised higher.

So it’s likely to be a lively day in the currency markets:

Also coming up today....

UK chancellor Philip Hammond will be busy defending yesterday’s budget, and the proposed rise in national insurance contributions for the self-employed.

Tory MPs aren’t happy about this apparent breach of the government’s manifesto commitments, so it could be a long day for Hammond....

Supermarket chain Wm Morrison, the Co-operative Bank, Domino’s Pizza and estate agent Countrywide are reporting results.

The John Lewis chain will be telling its staff the size of their annual bonus. It’s likely to be much smaller than in recent years, which explains why journalists aren’t invited to this year’s event.

Finance journalist Simon Neville (and his young apprentice) are disappointed...

We’ll be tracking all the main events through the day...