For a good nine years, the interest rates fall, the European Central Bank, economic activity and Inflation with a flood of money pushing. Now it is becoming increasingly clear that you take this course forever.
Nachtigall, ick hör’ dir patter – in the Berlin vernacular, this saying is used when someone assumes to know something in advance, in the rest of Germany, you think in such cases, to smell the Roast. Anyone who has followed the monetary policy of the European Central Bank (ECB), could be to turns, more recently, access to such speech, because the signs of a turnaround in interest rates, so the move away from ultra-loose monetary policy, these signs are increasing.
The inflation rate in the Eurozone rose in April, according to statistics Agency Eurostat to 1.9 percent. In March, consumer prices only with an annual rate of 1.5 per cent, this was however with the position of Easter in the calendar. In February, the inflation rate had been measured by 2.0 percent.
In other words: It is for ECB President Mario Draghi increasingly difficult for its zero interest rate policy and massive bond-buying programme deflation to justify the dangers. “The risk of Deflation I have never thought very big,” says the Director of the Munich Ifo-Institute, Clemens Fuest, on behalf of many of his colleagues. And: “It cannot be that the ECB reacts to the changed economic situation.”
The editorial recommends
US Central Bank keeps key interest rate at a standstill
Unanimously, the monetary policymakers left the benchmark interest rate at its current level. Experts no longer assume that the next step is now to wait long. (03.05.2017)
With little hope of a turnaround in interest rates
Contrary to hopes the European Central Bank will launch this year will probably be no change in the monetary policy. To many of the highly indebted Euro countries would get in trouble. (04.04.2017)
Belke: “the beginning of a currency war”
The team of consultants from Donald Trump attacked Germany because of the weak Euro. The Economist Ansgar Belke explains why this is only the beginning of a confrontation, which is damaging in the end for all Involved. (01.02.2017)
Fed turnaround on interest rates: at the beginning of a new Era?
The first interest-rate increase by the US Central Bank, the Fed, for almost ten years: Even if the monetary policy reins were tightened gently, and the consequences for the world economy. German Economists welcomed this step. (17.12.2015)
Comment: The turnaround in interest rates – a-overdue step
The US Central Bank, the Fed, rising at last from the policy of ultra-money out of cheap. Critics fear that the US will – and then the world economy stalled. There is nothing in it, says Rolf Wenkel. (16.12.2015)
Inflation target reached
With the zero interest rate policy and bond purchases, the ECB wants to pump liquidity into the markets, the credit demand to stimulate the economy, and inflation, the rate increase is held to be ideal: just under two per cent. This state is now reached, apparently, but Mario Draghi is hesitant. He argued that the energy prices have driven Inflation upwards, and that the core inflation rate, which does not take account of fluctuating energy prices, little has changed. “As the inflation rate fell, also because of the energy prices, argues the ECB, it is on the core inflation. The not fits together,” asks Ifo President Fuest.
Federal Finance Minister Wolfgang Schäuble stated at the beginning of may to the public that there is nearly nine-years after the financial crisis, the first signs of an end to the policy of low interest rates. “As the economic situation in the Eurozone as a whole has improved and the fear of Deflation has disappeared, there are hints from the circle of the governing Board, what you loose there, wants to gradually initiate the exit from the ultra-monetary policy.”
The conjectures of the Minister on a change of direction of the ECB does not come about by chance: at the end of April, the ECB with its President Mario Draghi cautiously optimistic about the economic development in the Euro-zone. In early may, Draghi was rowed in a speech before the Dutch Parliament, however, there and back again: The time for a turnaround in interest rates was not yet ready to – “This time hasn’t come yet”.
Turnaround in interest rates at the turn of the Year?
Others see it differently. The interest of experts of the Federal Association of public banks (VÖB) to count on in the coming twelve months, with a firmer stance of the ECB. First decisions of the Central Bank for a slow exit from ultra-loose monetary policy can be expected to the year 2017/18, write the VÖB-experts. “While the Fed has raised interest rates already and will continue to do so, you must tune-in to the ECB first of all, the markets are communicative on a change of course.”
Among the sharpest critics of the Draghi’s loose monetary policy, Bundesbank President Jens Weidmann, has already said in April, a discussion on a normalization of monetary policy as a legitimate and now for an adjustment in the ECB’s communication promotes: “The strengthening of economic development in the Euro area and the robust Outlook, the normalization in the view,” he said at a Meeting of the seven leading industrial Nations in the Italian city of Bari.
ECB chief Mario Draghi: “The time is not yet ripe”
Unwillingness to introduce reforms promoted
However, the ECB will act in terms of interest-rate turnaround and careful, says BayernLB strategist Norbert Wuthe. Although the choice of the liberal Euro-proponent of Emmanuel Macron to the French President to facilitate the exchanges have triggered, however, “an increase in interest rates would threaten the sustainability of the heavily indebted Italian state”. This is the Crux of the ultra-monetary policy of the ECB, loose your critics say: While it pushes the economy and Inflation only moderately, it gives the highly indebted countries in the South of the Euro zone, time and air in order not to delay reforms.
“It is high time that the ECB will initiate an end to the policy of low interest rates,” says the President of the Association of the family business, Lutz Goebel. “With the fire is dangerous purchase of government and corporate bonds, the ECB is preparing the next financial bubble, and, above all, they financed the reform unwillingness in Europe.”
Experts such as Commerzbank chief economist Jörg Krämer is not likely but with a rapid change of course. “The monetary Union is not a French President Macron to rest,” he told the Reuters news Agency. “Therefore, the representatives of the highly indebted countries in the ECB are pushing the Council to continue on a loose monetary policy.”
Resentment grows
Especially in Germany the discontent with the ECB grows. The banks are sounding the Alarm and roll the drawbacks of the ultra-lax monetary policy more and more on the customer, where new fees will be required. Recently, the scientific adviser of Federal Minister of economy, Brigitte Zypries stressed the dangers of the ECB’s rate for the financial system. In the same Horn, the International monetary Fund (IMF), warned of a permanently weak economic growth blew now.
“The disadvantages of expansionary monetary policy – the distortion of the capital markets, the uncertainty of savers, the stress on the banks is dominated increasingly by the advantages. It also leads to a redistribution of income between creditors and debtors in Europe, is a side effect of this monetary policy, the large potential for conflict involves,” says Ifo President Clemens Fuest in an Interview with the börsen-Zeitung. And the German savers continues to be Stupid: “The savers will have to live in 2017, with a significantly negative Real rate.”