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Joerg Asmussen, one of the six ECB Executive Board members that are at the core of monetary policy for the euro area, said today that the ECB’s guidance, which states that interest rates will remain low, goes further than twelve months forward.
The ECB departed from its previous procedure last week by pledging to maintain rates at their current levels or lower for an extended period in a bid to address heightened volatility in the financial markets. This adoption of forward guidance follows in the footsteps of the Federal Reserve, which has for some time now been committing to keep rates low for future periods.
In an interview with Reuters today, Mr Asmussen said that this extended period goes beyond 12 months. He also refused to rule out a further interest rate cut or the possible introduction of a new long-term refinancing operation, a mechanism by which the ECB could provide further loans to eurozone banks, saying ‘we have a whole range of non-standard instruments that can be deployed if and when the need arises.’
He stressed that he thought no further action was warranted currently, saying ‘We are now driving exactly at the right speed. We would not have a foot on the brake and also not on the accelerator. This is given the data as we see them right now.’
This commitment to an accommodative monetary policy has heaped pressure on the euro, pushing it down 0.7% to 1.2785 against the dollar by mid-afternoon in New York, after earlier having sunk as low as 1.2754.