* ECB holds refi rate at 0.5 percent, deposit rate at zero
* Draghi reaffirms forward guidance on rates
* Says policy to support recovery into 2014
* Considering more information such as published minutes
By Sakari Suoninen
FRANKFURT, Aug 1 The European Central Bank left
interest rates at a record low 0.5 percent on Thursday and
affirmed 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
"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, affirming last month's first stab at
giving forward guidance on rates.
That was unanimously supported by the 23-strong council, he
Stronger economic reports in the past few days support the
ECB's expectations of a pick-up later this year, though the
policy options are complicated by market responses to the U.S.
Federal Reserve's plans to slow its stimulus programme.
"Euro area economic activity should stabilise and recover at
a slow pace. The risks surrounding the economic outlook for the
euro area continue to be on the downside," Draghi said.
"Recent developments in global and financial market
conditions and the related uncertainties may have the potential
to negatively affect economic conditions."
The ECB reacted last month to market turmoil sparked by the
Fed's exit plan by breaking with precedent and offering forward
guidance on rates.
Individual policymakers' interpretations of that guidance
over the last month have blurred the message, however, with
Bundesbank chief Jens Weidmann insisting the ECB had not "tied
itself to the mast", while fellow German policy Joerg Asmussen
said the guidance was good for "beyond" 12 months.
The result is that the initiative has proven only partially
successful in calming markets and offsetting fallout from the
"There is no precise deadline," Draghi said.
On Wednesday, the Fed said it would keep buying $85 billion
in mortgage and Treasury securities per month in an effort to
strengthen the economy, and gave a more dovish tilt to its
The ECB decision to leave rates unchanged was almost
universally expected in a Reuters poll.
"At this stage, we've seen several indicators improving a
little bit," Rabobank economist Elwin de Groot said, pointing to
closely watched business surveys, which showed euro zone
manufacturing grew for the first time in two years.
Moreover, unemployment in the 17-country bloc sharing the
euro fell for the first time in more than two years in June.
But lending to firms is still declining in the euro zone and
is especially weak across the bloc's troubled debtor countries,
which could keep calls for lower policy rates alive.
GUIDANCE ON GUIDANCE
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.
Draghi said he favoured 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
"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.
The ECB's forward guidance is more flimsy than the guidance
offered by the Fed, which, aside from getting ready to call time
on its quantitative easing plan, has promised to keep its main
interest rate near zero at least until the unemployment rate
falls to 6.5 percent and as long as inflation stays below 2.5
Draghi said there was no discussion of the ECB adopting an
economic threshold as a trigger.