European Central Bank President Mario Draghi said policy makers’ pledge to keep interest rates low explicitly allows for cuts in borrowing costs if market volatility resumes.
“The Governing Council has unanimously agreed to incorporate an easing bias that explicitly provides for further rate reductions, should the volatility in money market conditions return to the levels observed in early summer,” Draghi said at the Economic Club of New York yesterday.
ECB policy makers are seeking to prevent volatility in market rates from derailing a euro-area economic recovery that Draghi said was subdued, uneven and fragile. To that end, they pledged in July to keep official interest rates at or below current levels for “an extended period.” Borrowing costs had risen after the U.S. Federal Reserve said it was considering tapering its stimulus later this year.
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