ECB’s Draghi pledges rock-bottom rates as Germany calls for change

Ralph Orlowski | Reuters

European Central Bank (ECB) President Mario Draghi addresses a news conference at the ECB headquarters in Frankfurt, Germany July 20, 2017.

The head of the European Central Bank defended a pledge to keep interest rates at rock bottom on Thursday, batting back German calls for a speedy exit from years of easy money in the euro
zone.

With two weeks to go before the ECB decides on the future of its stimulus policy, its president, Mario Draghi, said the promise to maintain rates at their current level “well past” the end of its bond-buying programme was very important for keeping borrowing costs at bay.

“The ‘well past’ is very, very important in anchoring rate expectations,” Draghi said at an event in Washington, where he is due to attend the G20 meeting.

His comments suggested that phrase was likely to be kept in the ECB’s policy message at a meeting on Oct. 26 even if the euro zone’s rate setters decide to go ahead with an expected reduction in the monthly pace of their bond buys from the current 60 billion euros.

Draghi’s words also poured cold water on German hopes, expressed by the head of Bundesbank in an interview published earlier on Thursday, that an era of low or negative rates was finally nearing its end.

“(Ultra-low rates) must not last too long and, in an economic upturn, the monetary policy taps should be turned off in a quick and consistent manner,” Jens Weidmann was quoted as saying by Germany weekly Wirtschaftswoche.