Peters: ECB accelerating in a dead end

12 September 2019

“The current package of ECB measures is based on false expectations,” said Hans-Walter Peters, the Association of German Banks’ president. “It is a fallacy to believe that in the present highly fragile global economic situation you can fuel demand and investment with even lower negative rates and even ampler liquidity. The ECB makes me think of a car driver who accelerates in a dead end.

There is no sign of deflation risks in the eurozone, and the current economic slowdown doesn’t warrant any further monetary-policy emergency programme either. What’s more, in view of the global trade conflicts, potential devaluation effects for the euro that accompany today’s decision and could stimulate the economy are poisoned, for they increase the likelihood of similar rate cuts in other economic regions and this could set a devaluation spiral in motion that nobody can want.

It was high time for the ECB to finally introduce tiered negative deposit rates. This means that the enormous burden particularly on those commercial banks which enjoy a high level of trust among savers can be reduced somewhat. But this positive step is largely offset by the now even lower negative rates and the injection of additional liquidity.”

Three questions to Association of German Banks’ president Hans-Walter Peters in our blog.

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