The market thinks the ECB is bluffing again

Though the European Central Bank’s governing council left interest rates alone when it met this morning, monetary policymakers have cause for concern. The council’s staff lowered its GDP growth forecasts for this year, next year, and the year after that.

“Compared with the June 2015 Eurosystem staff macroeconomic projections, the outlook for real GDP growth has been revised down, primarily due to lower external demand owing to weaker growth in emerging markets,” ECB president Mario Draghi said in a statement.

It’s clear that an economically slowing China, which accounts for about 8% of euro zone exports, is weighing on their minds.

Euro zone inflation estimates also got trimmed. Draghi even said that a little temporary deflation might be on the way in coming months.

Meanwhile, there are no major changes are on the way for the ECB’s bond-buying program…

…but bluffing the markets is pretty much Draghi’s thing. Remember when he uttered the phrase “whatever it takes,” and kicked off a couple years of speculation that bond-buying was on the way (before it actually came)? This morning was a bit like that.

The euro immediately nosedived against the US dollar following his remarks this morning.

But European investors were thrilled at the prospect of an increasingly dovish central bank, and stocks rallied:

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