Michael Steen

Not the ECB (Getty)

The Bundesbank has weighed in on what forward guidance means for the European Central Bank and if you want the short version it boils down to: we have not forgotten about inflation.

The ECB pledged in July to keep interest rates at or below current levels “for an extended period of time,” which, as we’ve noted before has caused some confusion as to what precisely it means.

According to Germany’s central bank, that promise does not actually mean that interest rates cannot rise or that they will necessarily remain low for a long time. As it writes in its latest monthly report:

The decisive point in correctly interpreting this statement is that it is conditional on the unchanged obligation of the Eurosystem [the ECB and the eurozone’s 17 national central banks] towards its mandate of maintaining price stability (which means, operationally, medium term inflation that is below, but close to 2 per cent)… It follows that the ECB’s governing council has not bound itself. If higher price pressures become apparent in future compared to those expected now, forward guidance in no way rules out a rise in interest rates.

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It’s official: there will be no women on the ECB’s 23-member governing council when Gertrude Tumpell-Gugerell’s term ends in June. Meet Peter Praet, right, the Belgian central bank director who has just been chosen unanimously by EU finance ministers to take the place of Ms TG on the Executive Board.

The other main contender for the seat at the ECB’s top table was Slovak Elena Kohutikova, whose sex many pundits thought would help her beat Mr Praet. Politics trumped, however: her chances were dampened by Slovakia’s refusal to back the €110bn bail-out for Greece, officials said last week. Formal confirmation will take place tomorrow. The appointment of a European “northerner” might be seen to increase the chances of a “southerner” (such as Mario Draghi) for the ECB’s top job – especially given Axel Weber’s exitRead more