Draghi Finds Powerful Weapon in Words as Markets Heed His Voice

European Central Bank President Mario Draghi has found his most effective weapon is the sound of his own voice. Draghi yesterday caused the euro’s biggest drop in seven months by suggesting its recent appreciation could damp inflation, a signal that further interest-rate cuts remain a possibility. His pledge in July to buy government bonds precipitated a sea-change in sentiment that helped to shore up the 17-nation euro area economy, yet the ECB hasn’t spent a cent so far in its so-called Outright Monetary Transactions program. The ECB “is becoming a master of verbal intervention,” Danske Bank economists wrote in a research note. Draghi yesterday “managed to dampen recent de facto tightening...