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© Bloomberg. Multiple exposures were combined in camera to produce this image. Mario Draghi, president of the European Central Bank (ECB), speaks during the ECB rate decision news conference in Frankfurt, Germany.(Bloomberg) — The European Central Bank risks missing its chance to raise interest rates in this economic cycle if it doesn’t act this year, according to a German private bank.
Investors are betting that the euro zone’s economic slowdown — in part a consequence of global risks including U.S.-led protectionism and Brexit — will cause the ECB to push back its gradual exit from negative rates to next year. In a note to clients, Bankhaus Lampe questions the rationale for that view.
“This delay makes little sense to us, as the fundamental environment in 2020 is if anything weaker,” said Alexander Krueger, an economist at the bank in Dusseldorf. “Economic clouds are showing for the world economy, and above all for the U.S.”
The ECB, which holds its next policy decision on Jan. 24, says it’ll keep rates at record lows at least through the summer of 2019. Bankhaus Lampe says the central bank is well behind the curve and so should hike in the final quarter.
“Two or three rate hikes distributed over one and a half years won’t damage the economy,” Krueger said. “If they dangle the carrot forever and a day, the armory of conventional policy will remain yawningly bare.”
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Source: Investing.com
