By Shawn Langlois, MarketWatch
LONDON (MarketWatch) — European Central Bank President Mario Draghi waxed accommodative on Thursday, saying interest rates will remain low or go even lower for “an extended period of time.”
The euro EURUSD -0.85% turned lower against the dollar, hitting its lowest level since May during the press conference, while markets across Europe XX:SXXP +1.97% responded by extending early gains.
“Euro-area economic activity should stabilize and recover in the course of the year, albeit at a subdued pace,” Draghi said. “The risks surrounding the economic outlook for the euro area continue to be on the downside.”
Last month, the euro EURUSD -0.85% jumped above $1.32 when Draghi indicated that easing by the ECB was on the back burner.
Draghi said the decision to give forward guidance was “a very significant step” for the central bank.
Earlier, the ECB kept its main lending rate at a record low 0.5%, as expected, That’s the same level it’s been at since it was cut from 0.75% back in May, which marked the first reduction in 10 months.
Draghi’s job got trickier last month after U.S. Federal Reserve Chairman Ben Bernanke signaled that the central bank could start tapping the brakes on monetary stimulus as soon as this year.
Fears that tapering in the U.S. could further rattle the financially-stressed euro-zone countries were fanned this week by political upheaval in Lisbon that crushed Portuguese government bonds.
Draghi remained mostly mum on the recent developments in Portugal, other than to say the country is “in safe hands” and that it has “achieved remarkable results”
In a separate development, the Bank of England, with Mark Carney taking the helm, signaled it won’t be raising interest rates anytime soon, either.
Shawn Langlois is an editor and columnist for MarketWatch in London. Follow him on Twitter @slangwise.
