Central banks send clear signal on interest rates The European Central Bank and the Bank of England both took the unorthodox step of offering explicit guidance on low future interest rates on Thursday, in what amounted to a transatlantic rejoinder to hints of tightening by the US Federal Reserve. Dropping a longstanding policy of never "pre-committing" to future interest rate decisions, Mario Draghi, ECB president, ruled out any rate increase for an extended period, reflecting nervousness about the economic outlook for the bloc. 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." The euro and sterling fell against other currencies while equity markets rallied. Mr Draghi said the timing of the two announcements was coincidental and denied his institution had been forced into a more dovish communication policy by the Federal Reserve's recent hints that it would slow the pace of its quantitative easing bond-buying programme, which has sparked turbulence on financial markets. But, speaking about risks to the economic outlook in the euro area, he also said: "The recent tightening of global money and financial market conditions and related uncertainties may have the potential to negatively affect economic conditions." David Lloyd, head of institutional portfolio management at M&G Investments, said: "The recent market moves were prompted by Fed utterances on QE, and clearly the ECB and the BoE wanted to say "hang on" . . . [They] have noted the recent rise in [bond] yields and are taking issue with it. The ECB's governing council is to keep its three main interest rates at or below their current level "for an extended period" - a timescale Mr Draghi declined to define more closely, leaving the bank plenty of room to manoeuvre. While almost no one was expecting the ECB to raise interest rates any time soon, some investors applauded the clarity. "We realised we'd sort of reached the limits of QE and its effectiveness so it's right to reassure the markets that what they're thinking is correct," said Stewart Cowley, head of fixed income at Old Mutual Global Investors. Interest rates are going nowhere for a while so it's right that Mr Draghi reassures the market that we're not going to do a volte face. We'd reached the limits of QE so it's right to reassure the markets Stewart Cowley, Old Mutual Global Investors The ECB chief also said there had been an "extensive discussion" about a possible interest rate cut and that the decision to offer its "unprecedented" forward guidance had been unanimous - a statement that means Jens Weidmann, president of the hawkish Bundesbank, did not dissent from the view. The bank cut its main interest rate to 0.5 per cent in May and its deposit rate stands at 0 per cent. Mr Draghi said the bank kept an open mind on adopting its first negative interest rate in the future. While the bank still expects a gradual recovery for the eurozone later in the year, Mr Draghi presented recent improvements in business surveys in a more gloomy light than in previous comments, pointing out that the improvement amounted to a slower pace of contraction in the indicators. Following Mr Carney's first meeting as chair of the Monetary Policy Committee, the Bank of England chose to issue a rare statement along with its decision to hold rates. "The Committee noted that the incoming data over the past couple of months had been broadly consistent with the central outlook for output growth and inflation contained in the May report," the BoE said. However, the market still expects the first interest rate rise in 2015, rather than the 2016 date forecast in May and June before the Federal Reserve signalled it would rein back its quantitative easing programme. The euro was trading down 0.8 per cent lower against the dollar, hovering around $1.2901. Additional reporting by Robin Wigglesworth, Claire Jones and Alice Ross in London Draghi defends Treasury actions during his tenure Mario Draghi, president of the European Central Bank, defended the Italian Treasury's actions in taking out derivatives contracts during his decade in charge of the government office in the 1990s, writes Michael Steen. Italy risks potential losses of billions of euros on the contracts, according to a report by the Rome Treasury reported on by the Financial Times last month. The contracts were taken out in the run-up to Italy's entry, as a founder member, into the eurozone in 1999. "As far as the operations that have been carried out while I was there, they've been closed, they've been praised by [EU statistics agency] Eurostat and the [European] Commission in several public statements," Mr Draghi said at a monthly press conference at the ECB. They've not embellished the figures because you cannot embellish what is already known. They've already always been communicated, accounted according to the existing regulations at the time and they've all been made in the interests of the Italian Treasury. He added that taking out such derivatives was part of an "active management" of public debt and that "full transparency" in such procedures was essential.