ECB says rates to stay low for 'extended period'

The European Central Bank (ECB) president, Mario Draghi, has said that rates will remain at current or lower levels for an "extended period".

"Monetary policy will remain accommodative for as long as necessary," he told a news conference.

This represents the first time that the ECB has given an indication of its future guidance on the rate of interest in the eurozone.

The ECB left interest rates at the historic low level of 0.5% on Thursday.

The decision not to cut rates further comes amidst a backdrop of political crisis in Portugal after two key ministers resigned.

Earlier this week, Finance Minister Vitor Gaspar, who has overseen unpopular austerity measures in the country for the past two years, handed in his resignation.

That was followed by the foreign minister and junior coalition leader, Paulo Portas.

Bond yields in the country rose above 8% on Wednesday as Prime Minister Pedro Passos Coelho tried to stabilise his coalition.

Asked if there had been too much austerity in Portugal, Mr Draghi said that he thought the country had achieved "very remarkable results".

"It has been a painful route and the results have been quite significant, remarkable, if not outstanding.

"We are reassured by the new (finance) minister, by everything we know about her, so from this point of view, Portugal is in safe hands."

Speaking at a news conference following the ECB's interest rate announcement, Mr Draghi would not be drawn on how long he expected rates to remain low, only that the decision was "unanimous".

"It's not six months, it's not 12 months - it's an extended period of time," he said.

On his reasons for revealing the ECB's plan to keep rates low, Mr Draghi said: "We have an outlook of inflation in the medium term, such that it would justify this new way of communication our forward guidance - a downward bias in interest rates."

Anna van Densky

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