European central bankers broke new ground to protect their economies from a U.S.-led surge in bond yields, indicating they will keep benchmark interest rates low for longer than investors bet.
With rising market borrowing costs posing fresh threats to weak expansions, Bank of England Governor Mark Carney and European Central Bank President Mario Draghi gave greater clarity over their monetary policy thinking yesterday in the hope financial markets will correct.
The pound and euro slid against the dollar, while bonds and stocks rose as both officials used rhetoric to distance themselves from Federal Reserve Chairman Ben S. Bernanke’s signal that the U.S. is preparing to start unwinding its $85-billion a month bond-buying program later this year. That had sparked a global selloff in bonds, forcing up yields in economies less able than the U.S. to cope with tighter credit.
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