Here's One Way ECB Could Tweak Its Language on Interest Rates
(Bloomberg) -- The European Central Bank isn’t yet ready to change its language on when it might raise interest rates, but it’s getting close.
That’s why comments by chief economist Peter Praet this week might be significant. Speaking in Brussels, he dwelled on the importance of two particular words in the ECB’s policy statement: “expects” and “intended.”
The reason why his comments are relevant is because some policy makers are already said to be pushing for more clarity on how long borrowing costs will stay at their record lows once the bond-buying program stops.
Changing the language on rates to say the ECB “intends” to keep them at current levels for an extended period, rather than “expects” to, would be arguably a stronger guarantee that easy money won’t come to a sudden end.
Praet said the current formulation on rates has been used “until now” -- though he also wasn’t ready to say a change is imminent. Still, something to think about.
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