Yesterday President of the European Central Bank (ECB), Mario Draghi raised his concerns with regards to the inflation level in Europe. Draghi had, towards the end of last year, suggested inflation will increase in the Eurozone however his wording slightly changed yesterday as he merely suggested he was confident. This was a move from total reassurance, moreover Mr Draghi pointed to Euro currency movements as a cause for concern.

The Euro has been incredibly volatile lately making gains once again against the US Dollar and Sterling. Mario Draghi has previously mentioned that exports in the Eurozone will start to be affected as the currency fluctuations make EU products more expensive.

Are ECB Changes Close?

The European Central Bank have used huge sums of Quantitative Easing (QE) in order to steady the Eurozone economy. Now that Europe’s economy appears to be settling and moving into a more positive position the ECB can start to look at alternative options. The central bank are of course not going to tip-toe like they have the last few years and then suddenly make major changes, however the current measures may have achieved all they could. If inflation remains below the 2% level and fails to rise above that point then there could be stagnation issues.

Mario Draghi may this year consider raising interest rates which would certainty help the Euro to strengthen. However, if the changes happen too early it could encourage businesses to stop investing and move their funds back into banks. Over the past 2 years the negative bank deposit rates and 0% interest have given no returns when holding funds in a bank.

Later in the year, Mr Draghi could be forced to make some form of drastic change in order to make sure the Eurozone continues to improve and no doubt this could bring with it further Euro strength. It may be that until the Brexit uncertainty clears up he might be reluctant to make any major changes.