ECB Member: Central Bank Low Rate Statements Reassure Market

Major central banks’ reassurances that interest rates will stay low for some time are giving markets “a certain security”, a European Central Bank policymaker said on Thursday.

Another European official, however, warned against complacency and said it was too soon to say the euro zone crisis was over.

Ewald Nowotny, a member of the ECB’s Governing Council, said the so-called forward guidance from central banks was here because of weak economic growth and high levels of uncertainty.

“That means the central banks are giving markets a certain security that we will have a low level of interest rates for the foreseeable future, no rise but rather steady or lower,” he told a panel discussion at an economic conference in Austria.

“But this forward guidance is not unconditional.”

The ECB has tied its ‘forward guidance’ on interest rates remaining low to the inflation outlook and monetary dynamics remaining subdued – a scenario that shows no sign of changing any time soon.

Non-euro zone Britain’s is tied to unemployment, which the Bank of England also believes will remain stubbornly high for some time.

Nowotny made his comments ahead of an ECB policy meeting next Thursday, when the central bank is expected to leave its main interest rate unchanged at 0.5 percent.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza