Bundesbank chief: ECB's forward guidance no revolution

The European Central Bank's clear signal that interest rates are not going to rise in the immediate future is not the mini-revolution that many observers say it is, Bundesbank President Jens Weidmann argued Thursday. "This is no historic turning point in monetary policy communication," Weidmann told a conference in Munich. "This assessment is no change in strategy. It's an attempt to explain our monetary policy direction in a way that is even easier to understand." The ECB "is not pre-determining the path of interest rates in advance. The governing council is not tying itself to the mast, as Odysseus did," the German central bank chief continued. As president of the Bundesbank, Weidmann sits on the ECB's policy-setting governing council, which last week decided to hold its key "refi" rate steady at 0.50 percent for the third month in a row. Furthermore, in comments that helped sent stock markets rallying, ECB chief Mario Draghi vowed that "monetary policy will remain accommodative for as long as necessary". And the guardian of the euro "expects the key ECB interest rates to remain at present or lower levels for an extended period of time," Draghi said. "Our exit (from low interest rates) is very distant." The remarks were interpreted as the so-called "forward guidance" that the markets had been waiting for. But Weidmann played down their significance Thursday. "It's our way of describing our foreseeable monetary policy reaction against the backdrop of the current data," he said. But "it should be noted that the orientation is conditional upon economic developments. This forward-looking statement should not exclude that the interest rates will be increased if price pressures look as if they will increase in the coming months," Weidmann said.