Inflation recovery conditional on low rates through summer: ECB’s Draghi

BRUSSELS (Reuters) – The recovery in inflation expected by the European Central Bank is conditional on market interest rates staying low through the summer of next year, the ECB’s President Mario Draghi said on Monday.

Draghi described an acceleration in underlying inflation in the euro zone as “relatively vigorous” and expressed confidence that a pick-up in wage growth would continue.

But he reaffirmed the ECB’s pledge to keep rates at their current, rock-bottom level “through the summer” of next year, implicitly rebuffing calls from some policymakers to tighten more quickly.

“Steering expectations of the policy rate path was critical because the path of inflation that the Governing Council viewed as moving closer to the objective of a sustained adjustment was – and still is – conditional on a term structure of interest rates that embodies expectations of constant policy rates over an extended period of time after December 2018,” Draghi told the European Parliament.

Austria’s central bank governor Ewald Nowotny said in an interview published on Sunday he would welcome moving the ECB’s deposit rate toward -0.2 percent from -0.4 percent now.

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