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European Central Bank commits to low interest rates
06 July 2013
Running out of
options to boost the flagging eurozone economy, the European Central Bank has
taken a leaf out of the Federal Reserve's play book and promised it is not
going to put up the cost of borrowing anytime soon and indeed could cut
interest rates further.
ECB head
Mario Draghi said: "The Governing Council took the unprecedented step to give
forward guidance in a rather more specific way than it ever did in the past. It
says the key ECB interest rates to remain at present or lower levels for an
extended period of time. It's the first time the Governing Council says so."
Draghi
said the decision to issue ‘forward guidance' was driven by market volatility,
which took hold after the Federal Reserve last month set out a plan to begin
slowing its stimulus.
But he would
not be more specific on how long ECB rates would stay at record lows. "It's not
six months, it's not 12 months. It's an extended period of time."
The ECB
met as political crisis in Portugal pushed the interest rates it is having to
offer on its bonds to unsustainable levels.
Draghi
said ECB rules meant it could not intervene to help, but he had encouraging
words for Lisbon: "I think Portugal has achieved very remarkable results. It
has certainly been a painful route and the results that have been achieved have
been quite significant, remarkable, if not outstanding."
The
tensions in Portugal, and in Greece, risk sapping confidence one year after
Draghi imposed some calm by vowing to do "whatever it takes" to save the euro.
