European Central Bank is unlikely to keep its interest rates low

European Central Bank is unlikely to keep its interest rates low
Published: 26 August 2013
FRANKFURT - The European Central Bank is unlikely to keep its interest rates low for years, the head of the German Bundesbak said on Monday, but warned that the eurozone crisis is far from over.

"My assumption is not that interest rates will remain low for years, not least because the economic impulse of ultra-easy monetary policy will fade with time and the risks for financial stability will increase," Jens Weidmann said.

Weidmann, who heads the German central bank, was quoted in an interview with business daily Handelsblatt.

ECB chief Mario Draghi said in July that eurozone interest rates -- already at historical lows ― would remain "at present or lower levels for an extended period of time" and that an exit from the current policy of low interest rates was "very distant."

But Weidmann, who as Bundesbank chief sits on the ECB's decision- making governing council, reiterated that Draghi's remarks - known as "forward guidance" - did not constitute a firm promise.

They were "consciously formulated in this way because there are conditions attached", Weidmann said.

"The expectation that interest rates will not be increased for a long period is based . . . on our economic forecast.

If subsequent data point to a changed outlook for price stability, we will adjust our monetary policy accordingly," he said.

The current period of relative calm in the eurozone's financial markets does not mean that the single currency region's long-running crisis is over, Weidmann warned.

- AFP
Tags: EU, Eurozone,

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