ECB head vows patience with interest rate

FRANKFURT • Mario Draghi promised that the European Central Bank will take its time to lift interest rates, reinforcing last week’s agreement by policy-makers to keep borrowing costs unchanged at least through the summer of 2019.

“We will remain patient in determining the timing of the first rate rise and will take a gradual approach to adjusting policy thereafter,” the ECB president said in a speech in Sintra, Portugal.

“The path of very shortterm interest rates that is implicit in the term structure of today’s money-market interest rates broadly reflects these principles.” Draghi made it clear the ECB’s plan to halt its bond-buying program this year, closing an extraordinary chapter in a decade-long struggle with financial crises and recession, doesn’t mean the central bank is ready to withdraw its support.

Governing Council member Erkki Liikanen said that economic developments remain key in determining the path of interest rates.

“The timing is important but also that the future depends on data,” he told reporters in Helsinki, adding the ECB may keep borrowing costs at current lows even after the end of summer next year “if it is needed, to ensure monetary policy provides adequate support to reaching the price stability target.”

In Sintra, Draghi said euro-area inflation is finally picking up and the economy is showing underlying strength, while adding that uncertainty has grown.

“The downside risks to the outlook come from three main sources,” he said. “The threat of increased global protectionism prompted by the imposition of steel and aluminum tariffs by the U.S.; rising oil prices triggered by geopolitical risks in the Middle East; and the possibility for persistent heightened financial market volatility.”

The comments come just as China vowed to retaliate “forcefully” against President Donald Trump’s threat to impose tariffs on another US$200 billion of Chinese imports.