by Calculated Risk on 7/04/2013 10:34:00 AM

From David Keohane at FT Alphaville: Forward guidance is contagious and the ECB has caught it

From a very dovish Mario Draghi’s press conference following the European Central Bank’s decision to keep its key rates on hold ...

Looking ahead, our monetary policy stance will remain accommodative for as long as necessary. The Governing Council expects the key ECB interest rates ... to remain at present or lower levels for an extended period of time. This expectation is based on the overall subdued outlook for inflation extending into the medium term, given the broad-based weakness in the real economy and subdued monetary dynamics. In the period ahead, we will monitor all incoming information on economic and monetary developments and assess any impact on the outlook for price stability ...

This feels really rather significant.

And from the WSJ: ECB Chief Gives Rate Forecast

It is a radical departure from the policy the ECB has followed ever since it started operations in 1999, under which it never pre-committed to any level of rates in advance.
...
Earlier in the day, the Bank of England had also broken with its usual practice, issuing a forward-looking statement that, likewise, appeared aimed at damping expectations of future interest rate increases. Mr. Draghi said it was a "coincidence" that the two things had happened on the same day.

Mr. Draghi drew attention to the fact that the council had been unanimous on giving its new guidance, implying that even hawkish members such as Germany's Jens Weidmann had consented to what was a powerfully dovish signal.