Following future ECB head Christine Lagarde's dovish comments that the central bank hasn't hit the lower bound on rates (yet):
In her first comprehensive comments on monetary policy since winning the job, she said Thursday the ECB has the tools to tackle a downturn and must be ready to use them if needed. The euro weakened slightly after the remarks were published.
European Central Bank policy maker Klaas Knot played bad-cop, saying hawkishly that the euro-area economy isn’t weak enough to warrant the resumption of bond purchases and such a step shouldn’t be taken unless the slowdown worsens.
While the Dutch central-bank governor said he’s open to an interest-rate cut, his remarks echo those by his German colleague Jens Weidmann:
“If deflation risks come back on the agenda then I think the asset-purchase program is the appropriate instrument to be activated, but there is no need for it in my reading of the inflation outlook right now,” Knot said in Amsterdam on Thursday.
“Not reactivating the asset-purchase program also means you keep some powder dry for when actually future contingencies happen.”
Euro spiked on the headline...
And bund yields spiked...
And stocks tumbled (from a key resistance level)...
Looks like Draghi has some work to do.