Central banks in Europe extend policy announcements

Two central banks in Europe extended their communication styles, adding qualifiers to traditionally sparse monetary policy statements. With both the European Central Bank and the Bank of England qualifying their monetary policy announcements for the first time, it appears, in part, that the more transparent communication style espoused by U.S. Federal Reserve Chairman Ben Bernanke has caught on, The New York Times reported Friday. But communication styles are as far as it goes. Neither the BOE or the ECB suggested pulling away from accommodating monetary policy as Bernanke has done recently, the Times said. The BOE with its new Gov. Mark Carney, said any suspicions the bank would raise interest rates soon were misguided. A long-standing tradition has been for the bank to announce its policy month to month, but make no mention of how long a specific decision would remain intact. In Germany, ECB President Mario Draghi used a phrase the U.S. Federal Reserve has been using for much of the economic downturn, saying interest rates would remain low "for an extended period of time." Draghi later told a press conference that he would not elaborate. "It's not six months. It's not 12 months. It's an extended period of time," Draghi said. The U.S. Fed's position had been to use cryptic, murky statements in the past. The difference between an economy making "modest" gains as opposed to one making "moderate" gains is about as far as the Fed normally goes in making a direct statement. The aim of adding, "for an extended period of time," to was to convince business leaders they could count on interest rates remaining low for a while, which was meant to encourage commitments to long-term projects or product development. The Fed then took it a step further. Careful not to call it a guarantee, the Fed said it would likely not change the federal fund rate until unemployment dropped to at least 6.5 percent. The two banks in Europe shifted the style of their policy statements Thursday, which was a national holiday in the United States.