ECB drops old philosophy but is short of new options
They are just telling what they think they are expected to tell. And they continue not doing anything - like politicians
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The European Central Bank's vow last week to keep record-low interest rates "at present or lower levels for an extended period" is a big philosophical shift for a bank that used to insist it would not tie its hands.
On the face of it an unprecedented and bold move, such 'forward guidance' is really just formal recognition of what markets expected anyway, and the bank's realistic policy options are narrowly confined.
ECB President Mario Draghi, who vowed a year ago to do "whatever it takes" to save the euro, said the move was driven by market volatility, which set in after the U.S. Federal Reserve last month set out a plan to begin slowing its stimulus.
"Draghi's message was a clear break from the 'we never pre-commit' ECB of the past," said Andrew Bosomworth, a senior portfolio manager at Pimco, the world's largest bond fund.
"The Governing Council wants the world to know they are on a different timetable to the Fed," he added.
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