Charles Hugh Smith
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Experts Say: 2017-03-17
ECB to decide later whether to raise rates or end QE first
The European Central Bank will decide at a later time whether to raise interest rates before or after ending its bond purchase program, ECB policymaker Ewald Nowotny told a newspaper on Thursday.
The Austrian central bank governor said the ECB could hike its remuneration of bank deposits, currently below zero, before the main rates at which it lends to banks.
His comments raise questions about the ECB's own guidance, reiterated only a week ago, that rates will stay at the current level, or even fall, until well after the ECB's 2.3 trillion euros ($2.48 trillion) bond-purchase program ends.
With inflation in the euro zone rebounding, the ECB has come under pressure, particularly from Germany, to end its policy of ultra-low rates and money printing. Some policymakers raised the possibility of a rate hike before bond purchases stop at last week's meeting, but did not receive broad support.
Asked about whether the ECB would stop buying bonds or raise rates first if the economic upswing continues, Nowotny told German daily Handelsblatt: "We will decide when the time comes."
"There is the American model to end the bond purchases first. Whether this model can be applied to Europe on a like-for-like basis would need to be discussed," he added.
Nowotny said it was also not necessary to raise all interest rates at the same time and by the same amount.
"The structure of the interest rates does not always need to remain constant," Nowotny said. "The ECB could also raise the deposit rate earlier than the prime rate."
Dallas Federal Reserve Bank President
Trader and NASDAQ listing manager
Professor of Economics at New York University
Former director of Office of Management and Budget under President Reagan
Professor of International Political Economy at Harvard University
The senior foreign-exchange and interest-rate strategist
Chief investment strategist at Clarity Financial
Trader, founder of Muddy Waters Research
Financial analyst and economist
Chief economic adviser at Allianz SE
Governing council member of the European Central Bank
Executive Director of UBS AG Wealth Management
Head of the European Commission
Premier of the State Council of the People's Republic of China
Germany’s Federal Minister of Finance
Ex-member of the Governing Council of the ECB
Former editor-in-chief of The Economist
Head of the Central Bank of China
Chancellor of Austria
Ex-Director of the Budget Office under the President of the United States
Investor, billionaire, the head of Janus Capital Group
Professor at NYU’s Stern School of Business
A former adviser to the president of the Dallas Fed
The Senior Research Scientist of the Institute of Europe RAS
Director of the Institute for Advanced Study in Warsaw
Billionaire, head of the Mexican Civilian Silver Association