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- ECB Rate Hike in 2019 Not an Absurd Expectation, Bundesbank’s president Weidmann Said
ECB Rate Hike in 2019 Not an Absurd Expectation, Bundesbank's president Weidmann Said
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Loading...Investor expectations for an interest-rate increase by the
European Central Bank in 2019 aren’t totally unjustified as downside risks to
the economic outlook recede, according to Bundesbank President Jens
Weidmann.
“The balance of risk might be more favorable today than it was before,” Weidmann said in an interview with Bloomberg TV. Anticipations of a change in borrowing costs in two years “don’t sound absurd” and are “in the possibilities that I see,” he said in Frankfurt after presenting the central bank’s annual report.
Accelerating inflation and a strengthening economic outlook have fanned a debate in the 19-nation euro area about the appropriate degree of stimulus as central banks prepare for a policy shift. While officials including Weidmann are arguing that the time to talk about an exit is coming closer, ECB PresidentMario Draghi contends that record low rates and a 2.28 trillion-euro ($2.4 trillion) quantitative-easing plan are still necessary to produce a sustained pickup in inflation.
“The global economy, but as well the economies of the euro area, have shown a certain robustness vis-a-vis surprises that we felt before were risks to our forecast,” Weidmann said. “We believe that the upswing that we’ve already seen before will continue. That means also that domestic price pressures will increase over the forecast horizon.”
For the latest ECB projections on growth and inflation, click here
The Bundesbank raised its risk provisions by 1.8 billion euros to 15.4 billion euros at the end of 2016. Weidmann said a “similar” amount as last year will be set aside in 2017 to manage losses the Bundesbank anticipates to make once the ECB starts to raise interest rates.
The Bundesbank posted a profit of 963 million euros for the year, of which it transferred 399 million euros to the government -- the lowest amount since 2004.
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