Mario Draghi’s promise to avoid surprising investors as the European Central Bank heads for the stimulus exit will require him to be clearer on an old-fashioned policy tool that hasn’t been touched in two years: interest rates.
The ECB president opened a conference in Frankfurt on Wednesday by saying policy adjustments will be “predictable, and they will proceed at a measured pace.” While the immediate task is to decide when to stop bond purchases, the real uncertainty lies in the institution’s vague expectation that borrowing costs will stay at current levels until “well past” the end of that program.