The European Central Bank (ECB) could further slash its super-low interest rates if the economic outlook worsens, its chief economist Peter Praet said yesterday, adding that the bank still has ammunition to fight deflation.
“We have not reached the physical lower bound” on rates, Praet told Italian daily La Repubblica in remarks released by the Frankfurt-based ECB.
“If new negative shocks should worsen the outlook, or if financing conditions should not adjust in the direction and to the extent that is necessary to boost the economy and inflation, a rate reduction remains in our armory,” he said.
ECB President Mario Draghi suggested otherwise last week.
Draghi surprised investors after the ECB’s policy decision on Thursday last week, when he said he did not think more rate cuts would be needed. He told EU leaders in Brussels that the central bank had “no alternative” to monetary-policy action that has taken the deposit rate to a record-low minus-0.4 percent, according to two officials familiar with deliberations.
In a bid to revitalize a lackluster economy and boost chronically low inflation, the ECB last week slashed already record-low interest rates, prepared to pump massive new sums into the banking system and, for the first time, said it would start buying corporate bonds.
The unprecedented package “should bring us close to the 2 percent [inflation] target at the end of 2018,” Praet said.
The ECB has battled for years to push inflation back up to levels it believes are consistent with healthy economic growth, to little avail.
In fact, eurozone inflation turned negative last month, as consumer prices declined by 0.2 percent.
Underlining the ECB’s determination, Praet did not rule out deploying the drastic tactic of simply printing money and giving it away — a measure dubbed “helicopter money.”
“The question is if and when is it opportune to make recourse to that sort of instrument which is really an extreme sort of instrument,” the economist said. “There are other things you can theoretically do.”
Additional reporting by Bloomberg
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by