Euro zone ‘over the worst’

ECONOMIC indicators signalled that the euro zone was through the worst, European Central Bank (ECB) president Mario Draghi said yesterday, reiterating that officials planned to keep interest rates low for the foreseeable future.

“Confidence indicators have shown some further improvement from low levels and tentatively confirm the expectation of a stabilisation in economic activity,” Draghi said after the central bank kept its benchmark rate at 0.5 percent. Policymakers expected to keep borrowing costs “at the present or lower level for an extended period of time.”

Draghi is trying to assure financial markets that the ECB will keep borrowing costs low enough to foster a recovery from the euro zone’s longest recession and will not tighten policy too soon, as it did in 2011.

While euro zone manufacturing expanded for the first time in two years in July and business confidence improved for a third month, lending to companies and households fell the most on record in June.

Last month the ECB took the unprecedented step of giving investors guidance on its rate expectations, joining the Federal Reserve and other central banks in trying to provide a clearer picture of its thinking.

While Draghi said yesterday that policymakers did not discuss defining the guidance in terms of fixed time horizons or economic targets, he went a step further than last month and warned money markets against betting on rate increases any time soon.