ECB faces balancing act on rates as eurozone recovers
Mario Draghi, president of the European Central Bank (ECB), addresses a press conference in Frankfurt, on August 1, 2013. The European Central Bank faces a delicate balancing act at its policy meeting this week as the nascent recovery in the crisis-stricken euro area remains extremely vulnerable to setbacks. The ECB is not expected to unveil any policy changes at its regular monthly meeting on Thursday, but central bank chief Mario Draghi will have to tread extremely carefully if the positive effects of the most recent measures are not to evaporate, analysts argue.
At the same time, “the effect of the (ECB’s) forward guidance seem to be fizzling out a good two months after its introduction,” Schubert said. UniCredit economist Marco Valli agreed.
Two months ago, Draghi ushered in what many ECB watchers saw as a revolution in communication policy by pledging to keep interest rates at their current historical lows — or even lower — for an extended period of time. The ECB had previously cut its key refinancing rate to an all-time low of 0.50 percent in May.
Never before has the ECB issued such “forward guidance”, even if Draghi has faced tenacious questions ever since about exactly what an “extended period of time” actually means.... Read the full, comprehensive news article and discuss at Citizen