ECB's Draghi reiterates last month's forward guidance on rates

FXstreet.com (Barcelona) - During its August monetary policy meeting the ECB Governing Council decided to leave the main interest rate unchanged at 0.5% for the third consecutive month. At the following press conference the ECB head Mario Draghi repeated the forward guidance introduced last month, namely that the key interest rates would remain at the current or even lower levels for "an extended period of time," although that was dependent on the outlook on inflation.

The ECB president indicated that improvements seen in recently released Eurozone economic data point to a slow recovery in the area later this year and in 2014. He warned however that the recovery could be threatened by weaker than expected domestic and global demand as well as the inability of EU national governments to implement structural reforms as quickly as necessary.

Draghi said that the Eurozone labor market was very weak and that it had to be reformed in order to boost competition. He stressed that reducing budget deficits should still be an important goal for EU Member States, but that they should also focus on stimulating growth. The creation of a banking union in the area would help decrease credit market fragmentation.

During the Q&A part of the press conference the ECB chief said that the Governing Council's decision to confirm last month's forwad guidance was unanimous.