ECB ready to act over interest rates

The European Central Bank is watching moves in market interest rates closely and is ready to use any policy option to temper them if needed, its president said yesterday.
By The Newsroom
Published 3rd Oct 2013, 10:11 BST

The central bank was “particularly attentive” to any moves in market rates which could threaten economic recovery or push inflation too low, Mario Draghi said after the ECB left official euro zone rates at a record low 0.5 per cent.

The ECB has grown concerned about market rates, which moved higher over the summer at the prospect of the US Federal Reserve unwinding its stimulus – a rise that subsided after the Fed delayed a reduction in its bond purchases.

Hide Ad
Hide Ad

Draghi said the ECB stood ready to use any of the “vast array of instruments” it has to act on market rates if needed, echoing his pledge in July last year to do “whatever it takes” to save the euro.

“With regard to money market conditions, we will remain particularly attentive to developments which may have implications for the stance of monetary policy,” Draghi said.

“We are ready to use any instrument including another LTRO if needed,” Draghi said with reference to ultra-long loans, which the ECB deployed in late 2011 and 2012 to pump over 1.0 trillion euros (£831.79bn) into the system.

A majority of economists polled by Reuters expect the ECB to keep its key rate at 0.5 per cent until at least April 2015.

They also predict it will serve up another course of long-term cheap liquidity to banks (LTRO), possibly by the end of this year.