* ECB exit “is still distant”, says Draghi
* Coeure says ECB can deploy other measures if warranted
* King: markets have “jumped the gun” expecting rate rises
* S&P says euro zone bond yields still far from danger zone
By Annika Breidthardt and David Milliken
BERLIN/LONDON, June 25 (Reuters) - Some of the world’s top central bankers sought on Tuesday to calm markets that have “jumped the gun” about the impact of the U.S. Federal Reserve’s plan to slow its bond-buying stimulus.
The chiefs of the European Central Bank and the Bank of England led the way, trying to douse expectations that the Fed’s announcement last week could lead them to follow suit and unwind their growth-supporting policies.
“In terms of monetary policy, price stability is assured, and the overall economic outlook still warrants an accommodative stance, the exit from which by the way is still distant,” ECB President Mario Draghi said in Berlin.
Earlier on Tuesday, one of Draghi’s lieutenants, Benoit Coeure, said the policy steps the ECB had taken to support growth and fight the euro zone crisis would stay “as long as necessary” and that it could go further still, if needed.
“There are other measures, standard and non-standard, that we can deploy if warranted,” he said in London.
The double-barrelled offensive from Draghi and Coeure showed the ECB is not about to follow the Federal Reserve, the first of the world’s major central banks to lay out a path for exiting its stimulus measures.
Yields on U.S. and other government debt have leapt since Fed Chairman Ben Bernanke said the U.S. central bank might start reducing its bond buying later this year and possibly end it by mid-2014.
Bank of England Governor Mervyn King said markets had overinterpreted Bernanke’s comments.
“I think people have rather jumped the gun thinking this means an imminent return to normal levels of interest rates. It doesn’t,” he said in his final appearance as governor before parliament’s Treasury Committee on Tuesday.
“The Federal Reserve has merely said that the easing, in which it is still engaging, may taper at some point depending on economic conditions,” King said.
If Europe will not follow the Fed’s lead, neither will Japan which has only just embarked on an extraordinary stimulus programme.
King’s successor, Mark Carney, said a return to a more normal policy stance was inevitable at some point and that banks and regulators should be prepared. “Eventually across all major jurisdictions the objective is to move away from exceptional emergency accommodation,” he said.
At the weekend, the Bank for International Settlements, known as “the central banks’ central bank”, ramped up pressure for an end to cheap money by saying an exit from accommodative policies would only become harder over time.
Jean-Claude Trichet, Draghi’s predecessor, sought to play down the significance of the BIS comments, saying they were just a reminder that ‘non-standard’ measures - like bond purchases - were not forever.
“I wouldn’t say it’s premature, it’s only a reminder,” the former ECB chief said. “We had only a reminder that the non-standard measures are not forever.”
In the euro zone, yields on Spanish and Italian government bonds have spiked by over half a percentage point since Bernanke’s comments last week, though they remain well below the levels of last summer when the ECB acted to prevent a euro zone break-up.
Moritz Kraemer, Standard & Poor’s head sovereign analysts for EMEA, said there was no major threat yet from the market shift.
“With all the movement that we have seen over the last fortnight or so ... we are far away from the red danger zone where we were last summer for example,” he said. “A lot of those countries have done a lot of pre-funding so there is no immediate threat to it.”
Draghi nonetheless stressed the importance of the ECB’s unused bond-purchase plan - dubbed Outright Monetary Transactions (OMT) - that he masterminded last year to head off the risk of a euro zone break-up, saying the bloc was more stable as a result.
“Indeed, I would say that OMT is even more essential now as we see potential changes in the monetary policy stance with associated uncertainty in other jurisdictions of the integrated global economy,” he said in a thinly veiled reference to the Fed’s plans.
Clear communication by the Federal Reserve and other central banks about their future intentions will be vital if turmoil is to be limited.
The International Monetary Fund’s chief economist, Olivier Blanchard, said an exit from so-called quantitative easing “is not fundamentally very difficult, but there is a problem of communication on how you do it, which is going to create volatility.
“But the volatility we have seen in the past week is exaggerated,” he added.
Nonetheless, euro zone policymakers are concerned that disruptions to markets could impede a recovery.
“We should not forget that changes of direction are always difficult, sensitive - they introduce volatility in financial markets and if they are not properly controlled they could derail the ongoing recovery,” Spanish Econmic Minister Luis de Guindos said at an event in Madrid.