Mario Draghi

The Magician Revealed

European Central Bank (ECB) President Mario Draghi attends the European Banking Congress at the Old Opera house in Frankfurt, Germany November 20, 2015. The European Central Bank is ready to act quickly to boost anaemic inflation in the euro zone, its president said on Friday, highlighting changes to its asset purchase programme and deposit rate as possible tools. REUTERS/Ralph Orlowski TPX IMAGES OF THE DAY
Has Mario Draghi lost that magic touch?
  • Why it matters

    Why it matters

    ECB President Mario Draghi no longer inspires confidence in the markets, now that his various monetary policy measures have failed to produce the desired results, the author argues.

  • Facts


    • The central bank’s total assets will likely increase to €3.6 trillion, or more than one-third of the euro zone’s entire economic output.
    • Mr. Draghi’s policies have not brought inflation even close to the ECB target of just under 2 percent.
    • The small group of associates he typically consults is referred to as his “kitchen cabinet.”
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Mario Draghi has just passed the halfway mark of his term in office. You don’t have to be a prophet to predict that the events of the past week will cast a long shadow over the rest of his presidency of the European Central Bank.

Mr. Draghi, the great interpreter of markets, has miscalculated. Deliberately or not, he fueled expectations that he was unable to fulfill. Even though the ECB’s quantitative easing program was beefed up on Thursday to €1.5 trillion ($1.63 trillion) and the negative interest rate on deposit accounts was increased, the euro shot up by almost 5 cents in an otherwise sluggish foreign currency market, while stock markets plummeted.

Some would argue that making investors happy is not the goal of monetary policy. But it was Mr. Draghi who, with the introduction of “forward guidance,” tried to take the markets by the hand and give them the most precise guidance possible over the future direction of monetary policy. It was Mr. Draghi who had developed the reputation of being a sort of magician of the markets.

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