Decoding Draghi: So when will mortgage rates rise?

European Central Bank president Mario Draghi has underlined that interest rates are going to stay at current lows for a considerable period of time. This will come as a relief to those on tracker mortgages, which move in tandem with ECB rates. Standard variable rates could also start to edge up when ECB rates rise, notwithstanding the fact that they are already well above EU norms here.

Below is what the ECB president said after today’s meeting of the bank’s council . . . and an interpretation of what it means. Remember that part of the reason central bankers speak in such a roundabout way is to give themselves room for manoeuvre.

What he said: "We continue to expect them [interest rates] to remain at present or lower levels for an extended period of time and well past the horizon of our net asset purchases."

What it means: Draghi is starting to come under pressure, from Germany in particular, to pull back on stimulating the euro zone economy.

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However, for the moment, he is holding firm. As the ECB’s asset purchases programme – or bond-buying – is due to continue until at least the end of this year, Draghi’s comments suggest he does not expect an interest rate rise until a good while after that. The big question are whether rates start to rise in 2018, which is now possible, and if they do, by how much.

What he said: " Sentiment indicators suggest that the cyclical recovery may be gathering momentum . . . however, underlying inflation indicators continue to remain subdued."

What it means: There is no doubt now that there is a pick-up in the euro zone economy and that inflation, the indicator that most influences interest rates, is on the rise. The February figures showed euro zone inflation at 2 per cent. As "below but close to" 2 per cent is the ECB inflation target, this might suggest an earlier move to increase interest rates.

However, Draghi said that, stripping out volatile items such as energy prices, underlying inflationary pressures were still low. The risks to the outlook were still on the “ downside”, he said.

So no interest rate rise for the moment. But close attention will now be paid to inflation data; if this picks up again in the second half of this year, the speculation about a rise in rates in 2018 will build.

What he said: The ECB has "lost its sense of urgency" to take further action.

What it means: This was the balance in Draghi's statement, which came in the question-and-answer session with journalists. It is important. While pointing out that there are still risks, Draghi was arguing that the ECB policies had worked, growth and inflation were on the up and the threat of deflation had passed.

For this reason, he said, the council felt it unlikely that interest rates would have to be cut further or that a programme of cheap loans for the banks would have to be extended.

Mortgage holders, while grateful that no early rise is on the way, should take note. If these trends continue, the era of super-low interest rates will come to an end and, as in the US, a process of gradual increases will begin.