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ECB Draghi: dovish pledge

On the yesterday’s press-conference the ECB President Mario Draghi said the regulator expects to keep interest rates low for an “extended period” in order to restrain market borrowing costs. As expected, the main refinancing rate was left at the record low 0.50% level.

“The Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time,” Draghi said in Frankfurt. According to him, the ECB chose words over deeds after an “extensive discussion” about cutting interest rates. Draghi said the bank kept an open mind on whether to cut the deposit rate below zero. According to him, the downside risks in the economy persist. 

The new ECB stance should give investors comfort that the upside to yields is limited at current levels and stimulate the consumers and borrowers. According to Commerzbank, “this is as dovish as the ECB can get without actually acting.”

Analysts at Berenberg Bank in London called the ECB’s introduction of a forward guidance a “mini revolution”: historically, Draghi and his predecessor Jean-Claude Trichet have said that the ECB “never precommits” to any future monetary policy.

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