This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

ECB Says Rates Will Stay Low for 'Extended Period'

By David McHugh

FRANKFURT, Germany -- European Central Bank President Mario Draghi has underlined the bank's determination to stick with stimulus for the struggling eurozone, saying the bank will keep its benchmark interest rate the same or lower "for an extended period of time."

The statement followed a meeting of the bank's rate council, which left the refinancing rate for the 17 European Union countries that use the euro unchanged at 0.5%. Draghi said the decision followed "an extensive discussion" of a potential rate cut.

Instead, the bank offered an attempt at what is called "forward guidance" -- a practice already used by the U.S. Federal Reserve to give more clarity about how long it will continue its measures to stimulate the economy.

Draghi rebuffed attempts by journalists at his news conference to pin him down about what an extended period meant. Asked if it meant 6 or 12 months, he said, "an extended period of time is an extended period of time."

He did not specify any concrete targets for unemployment or growth, as the U.S. Fed has done. The U.S. central bank has said its rates will remain near zero until U.S. unemployment falls to 6.5%.

The ECB provided additional guidance by saying that rates would remain low as long as three conditions continued to exist: no threat of inflation, weak economic output and anemic lending by banks. But again, no figures were mentioned.

Still, Draghi was clearly at pains to show the bank as leaning toward doing more, not less to help stimulate the eurzone economy. He said the current record low benchmark rate of 0.5% "is not the lower bound" and said that the bank's statements were intended "to inject a downward bias in interest rates for the foreseeable future."

In theory, a low interest rate could stimulate the economy by reducing borrowing costs on the loans businesses need to expand and create more jobs. The eurozone economy shrank 0.2% in the first quarter, the sixth quarterly decline in a row.

Yet the currently low refinancing rate -- the rate the ECB charges private sector banks to borrow -- is not being passed on by banks. That is because banks themselves often have strained finances and are keeping money back to meet new regulatory requirements aimed at strengthening the financial system.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $129.09 0.00%
FB $79.75 0.00%
GOOG $571.34 0.00%
TSLA $197.32 0.00%
YHOO $44.11 0.00%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs