Central banks assuring markets with low rates guidance: ECB's Nowotny

Thu Aug 29, 2013 6:09am EDT
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By Michael Shields and Georgina Prodhan

ALPBACH, Austria (Reuters) - Major central banks' reassurances that interest rates will stay low for some time are giving markets "a certain security", a European Central Bank policymaker said on Thursday.

Another European official, however, warned against complacency and said it was too soon to say the euro zone crisis was over.

Ewald Nowotny, a member of the ECB's Governing Council, said the so-called forward guidance from central banks was here because of weak economic growth and high levels of uncertainty.

"That means the central banks are giving markets a certain security that we will have a low level of interest rates for the foreseeable future, no rise but rather steady or lower," he told a panel discussion at an economic conference in Austria.

"But this forward guidance is not unconditional."

The ECB has tied its 'forward guidance' on interest rates remaining low to the inflation outlook and monetary dynamics remaining subdued - a scenario that shows no sign of changing any time soon.

Non-euro zone Britain's is tied to unemployment, which the Bank of England also believes will remain stubbornly high for some time.

Nowotny made his comments ahead of an ECB policy meeting next Thursday, when the central bank is expected to leave its main interest rate unchanged at 0.5 percent.   Continued...

Austrian National Bank (OeNB) Governor and ECB Governing Council member Ewald Nowotny gestures as he briefs the media during a news conference in Vienna July 8, 2013. REUTERS/Leonhard Foeger