Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

ECB Has Missed Its Chance to Raise Interest Rates, HSBC Says

Published 15/01/2019, 10:06 pm
Updated 16/01/2019, 12:06 am
© Bloomberg. A sightseeing boat travels on the River Main past the European Central Bank (ECB) skyscraper headquarters, right, at dusk in Frankfurt, Germany.

© Bloomberg. A sightseeing boat travels on the River Main past the European Central Bank (ECB) skyscraper headquarters, right, at dusk in Frankfurt, Germany.

(Bloomberg) -- HSBC has a warning for those expecting the European Central Bank to start tightening monetary policy: the institution has missed its opportunity.

Recent data “have been dismal,” Simon Wells, an economist at HSBC in London, said in a note to clients. The latest figures on Tuesday showed Germany, the euro zone’s biggest economy, only narrowly dodged a recession. France is slowing and Italy has stagnated. The only major economy bucking the trend is Spain, Wells said.

“We think the narrow window in which the ECB could have lifted its key interest rate has closed. The case for a rate rise on inflation grounds has been weak for a while and with growth slowing, jittery markets and low inflation, we see ECB rates on hold until at least the end of 2020.”

HSBC joins a growing list of economists and investors who predict President Mario Draghi won’t be able to lift rates from record lows before his term ends in October. German private bank Bankhaus Lampe argued on Monday that if the ECB doesn’t tighten late this year then there’s no reason to believe it’ll be able to do so in 2020 either.

The ECB, which will next set policy on Jan. 24, expects to keep interest rates at record levels at least through the summer. Draghi may address the situation on Tuesday at the European Parliament in Strasbourg. In a statement in the morning he urged governments to pursue reforms to realize the full benefits of the single currency. Wells said that’s another opportunity foregone.

“The window for structural reform in the ‘good times’ has closed. In our view, there is more cause for concern over the longer term. The opportunity to make hay while the sun was shining has been missed.”

© Bloomberg. A sightseeing boat travels on the River Main past the European Central Bank (ECB) skyscraper headquarters, right, at dusk in Frankfurt, Germany.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.