The Bank of England and the European Central Bank tore up their traditional scripts yesterday, making clear that interest rates will remain at rock bottom for a very long time in moves that sent currencies tumbling and equities soaring.
In what amounted to a transatlantic rejoinder to hints of tightening by the US Federal Reserve, Mario Draghi, ECB president, dropped a long-standing policy of never “pre-committing” to future interest rate decisions. He ruled out any increase for an extended period, reflecting nervousness about Europe’s economic outlook.
In London, Mark Carney, the Bank of England’s new governor, introduced a similar element of “forward guidance” into a statement on the economy by saying the market’s recent expectations of rate rises in 2015 “were unwarranted”.