ECB rate rise ‘unlikely until 2016’

One of the European Central Bank’s chief decision-makers has all-but ruled out any rise in the eurozone’s key benchmark interest rate — from its current record low — for at least two years.

ECB Governing Council member and Austrian National Bank chief Ewald Nowotny told his country’s largest newspaper at the weekend that as the recovery in the eurozone was still at an early stage, it remains unlikely the ECB will increase its rates until 2016, when it is hoped more sustainable economic growth will be evident.

In an interview with the Vienna-based Krone Zeitung, Mr Nowotny said the eurozone economy is only showing signs of green shoots at present.

“Interest rates will turn as soon as there is clear growth; so more than 2%. But from today’s perspective, that will hardly be before 2016,” he said.

The ECB has already forecast that the eurozone economy will grow at a rate of between 0.5% and 3.1% between now and 2016.

Earlier this month, the bank launched a range of measures — including the lowering of its key benchmark interest rate from 0.25% to a record low of 0.15% — aimed at lowering the euro’s exchange rate, combating low inflation and boosting the single currency economy.

Mr Nowotny also opined that ECB money is not always reaching companies wanting to borrow funds.

The ECB’s new measures, from earlier this month, also included imposing a negative interest rate on deposits, by cutting bank deposit rates from 0% to 0.1% in a bid to encourage more banks to lend to businesses, rather than holding on to money.

Mr Nowotny’s broader comments come hot on the heels of similar ones made by ECB president Mario Draghi, who told media in recent days that headline rates would remain low for some time.

Mr Draghi told Dutch daily De Telegraaf that the prolonging of banks’ access to unlimited liquidity until the end of 2016 should be seen as a firm signal. “Our programme in support of bank lending to businesses will continue for four years. That shows that interest rates will remain low over a longer period,” he said.