5 Takeaways from the ECB's September Meeting

Appearing tanned and rested after the summer vacation, European Central Bank President Mario Draghi celebrated his 68th birthday Thursday with a dovish performance at his latest press conference. He unveiled slightly lower forecasts for eurozone economic growth and inflation, and indicated that should growth and inflation disappoint further, policy makers are prepared to respond with additional stimulus. His comments weakened the euro, and sent share prices climbing on European and U.S. stock markets. Here are five takeaways from the news conference.

#1: Growth is weaker

The eurozone economy won’t rebound from its second-quarter slowdown any time in the near future, with exports to China, Russia and other large developing economies likely to be weaker than expected. The ECB’s economists reckon the economy will grow 1.4% this year and 1.7% in 2016, down from the 1.5% and 1.9% projected in June. But Mr. Draghi said downside risks to those new forecasts have increased. The economists also cut their inflation forecast for 2017 to 1.7% from 1.8%, which would leave the ECB further away from meeting its inflation target.

#2: And the ECB is Willing to Act

With the growth outlook weakening, Mr. Draghi stressed repeatedly that the ECB has the means to provide further stimulus, although policy makers hadn’t discussed exactly how they would do that. “We’re not there yet,” he said, with the stress on the “yet.”

#3: It Can Buy Bigger Chunks of Bonds

Policy makers did decide that it would be fine for the central bank to buy a larger share of each individual bond issue than it had initially been limited to, so it can now own up to 33% rather than 25%. That underlines the message that the ECB can add more stimulus, since it would make it possible to expand the bond purchase program. There was no discussion of limits on how much of a particular government’s overall debt it can own.

#4: The China Question

Developments in China have already affected the way the ECB is thinking about its policy options, but like other policy makers, Mr. Draghi doesn’t appear to know a great deal about what his Chinese counterparts are up to. He hoped to learn more during a meeting of finance ministers and central bank chiefs from the Group of 20 leading economies in Ankara, Turkey this weekend.

#5: More Important Things

The fate of Europe’s economy has been overshadowed in recent weeks by an increase in the numbers of people from Syria and elsewhere seeking refuge on the continent. “Any European should be horrified by the tragic loss of life happening on our doorstep,” Mr. Draghi said, adding that the ECB had no role to play in the response to the crisis.