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OeNB boss Holzmann and his assessment of when interest rates will be reduced

OeNB boss Holzmann and his assessment of when interest rates will be reduced
OeNB Governor Robert Holzmann
Image: Antonio Bayer

He sees no circumstances that would require the ECB to lower interest rates first. The head of the Oesterreichische Nationalbank (OeNB) said this on Bloomberg TV on Friday.

In his view, it is better to lower interest rates later rather than too early. The biggest risk to interest rate cuts is tensions in the Red Sea.

  • also read: ECB or Fed: Who will cut interest rates sooner?

For Bundesbank boss Joachim Nagel, the time has not yet come to abandon the tight monetary policy line in the euro area. It is now important to demonstrate perseverance: “Even if the remaining journey seems to drag on,” said Nagel on Friday in Frankfurt at the presentation of the 2023 annual report. “Even if the temptation may be great: it is too early to cut interest rates.” , he added.

More detailed picture later in the spring

The prospects in the fight against high inflation are not yet clear enough. Now it is important to pay attention to the data on wage developments and profit margins in the next few months. A more precise picture will only emerge in the course of the spring: “First we have to see more clearly that we will achieve our goal, reliably and soon. Then we can consider cutting interest rates.”

The tight monetary policy still needs to be given enough time to take effect. The ECB has taken the right course and made great progress, but it has not yet reached its goal. She will decide from interest rate meeting to interest rate meeting and will continue to do so at the council meeting in March.

Inflationary pressure eased

Inflationary pressure in the euro area had eased at the beginning of the year. Consumer prices only rose by 2.8 percent in January compared to the same month last year. As price inflation declines, the ECB is gradually coming closer to its target of an inflation rate of 2.0 percent. However, many experts do not expect a downward turn in interest rates until the middle of the year.

The ECB has kept interest rates constant since September 2023 after a series of increases. The deposit rate that financial institutions receive when they deposit excess funds with the central bank is 4.0 percent. The key interest rate at which banks can obtain fresh money from the ECB is still 4.5 percent.

The Harmonized Inflation Rate (HICP) for Austria, which was determined for Eurozone comparisons, was significantly higher at 4.3 percent in January.

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