MercoPress. South Atlantic News Agency

Euro rates to remain unchanged for extended period of time, says ECB

Draghi: “support to a gradual recovery in economic activity in the rest of the year and in 2014”

The European Central Bank left interest rates at a record low 0.5% on Thursday and said that they will remain there for some while to come and could yet fall further. ECB President Mario Draghi hinted that policy would not be tightened until well into next year at the earliest, although the central bank will give no time horizon for when rates might move.

“Our monetary policy stance ... provides support to a gradual recovery in economic activity in the remaining part of the year and in 2014,” Draghi told a news conference.

“The Governing Council confirms that it expects the key ECB rates to remain at present or lower levels for an extended period of time,” he said, reiterating last month's first stab at giving forward guidance on rates.

That was unanimously supported by the 23-strong council, he said. Draghi was guarded, however, when pressed on whether the policymakers discussed a rate cut this month.

“We actually discussed only forward guidance, and within that ... confirmation of forward guidance you have an implicit decision about today's interest rates,” he said. “And the decision about forward guidance was in fact unanimous.”

The apparent absence of a discussion about cutting rates contrasted with last month, when Draghi said the council had an “extensive discussion” about a cut before deciding to hold.

A closely watched business survey showed earlier on Thursday that Euro zone manufacturing grew for the first time in two years in July. Moreover, unemployment in the bloc fell for the first time in more than two years in June.

Despite the promising economic reports, the ECB policy options are complicated by market responses to the U.S. Federal Reserve's plans to slow its stimulus program.

Draghi wants to begin publishing the minutes of ECB meetings, which until now have been kept secret, and said proposals on providing markets with more information would be brought forward later in the year.

The ECB president said he favored a “richer communication”, explaining why decisions had or had not been taken. But he said it was vital that any change did not put at risk the independence of ECB members.

“We are not a one-country set-up,” he said.

A move to increase transparency could meet resistance from some ECB policymakers, who fear the move could open them up to political pressure from national governments.