Deutsche Bank AG chief economist Thomas Mayer said it is “dangerous” for the European Central Bank (ECB) to keep interest rates low for long.
What “I find dangerous is that we continue to get locked into this very low rate environment,” Mayer told a conference in New Delhi on Friday. “I am concerned that by keeping rates low for an extended period of time you are inducing people to build other decisions onto this low rate environment and adjust all their portfolio and investment decisions on these low rates.”
The ECB may raise borrowing costs next month to curb price pressures, President Jean-Claude Trichet said on Thursday after keeping the benchmark at a record low of 1 percent even as inflation breached the bank’s 2 percent limit.
The ECB may raise rates by a quarter of a percentage point next month, Deutsche Bank’s Mayer told the event organized by the Institute of International Finance. He expects further quarter-point increases in September and December.
Other ECB officials also signaled an interest rate increase might be necessary next month to stop surging commodity costs from fanning broader inflation. Headline inflation, which includes volatile raw material costs, has been above the bank’s 2 percent limit since December.
“Some question marks start to arise that some pressure for second-round effects develops, that some pass-through is being seen,” Bank of France Governor Christian Noyer said in an interview with Bloomberg Television in Paris. “We need to reaffirm very strongly that we will never let that happen.”
With economists concluding the ECB is all but certain to shift rates next month for the first since 2008, the euro rose to its highest in four months against the US dollar yesterday.
“There are risks with having a number of months with an excessive inflation rate due to the cost of commodities and energy,” Noyer said in the interview.
ECB Executive Board member Lorenzo Bini Smaghi said failing to react to faster headline inflation would make monetary policy “more accommodative” and eventually spur other prices.
ECB Executive Board member Jose Manuel Gonzalez-Paramo said in Cape Town yesterday that a rate increase is “possible but not certain.” It is clear that “the risks to inflation are on the upside and it is the mission of the ECB to prevent those from materializing, so we are ready,” he said.
Cyprus central bank governor Athanasios Orphanides said in Paris that central bankers must be “pre-emptive” in fighting inflation and that nothing should “distract” them from delivering price stability.
Economists at UniCredit Group, Morgan Stanley, Nomura International Plc and JPMorgan Chase are all now betting that the ECB will raise its benchmark rate to 1.75 percent by the end of the year. Those at ABN Amro Bank NV and Citigroup Inc expect an increase to 1.5 percent.
Napoleon Osorio is proud of being the first taxi driver to have accepted payment in bitcoin in the first country in the world to make the cryptocurrency legal tender: El Salvador. He credits Salvadoran President Nayib Bukele’s decision to bank on bitcoin three years ago with changing his life. “Before I was unemployed... And now I have my own business,” said the 39-year-old businessman, who uses an app to charge for rides in bitcoin and now runs his own car rental company. Three years ago the leader of the Central American nation took a huge gamble when he put bitcoin
TECH RACE: The Chinese firm showed off its new Mate XT hours after the latest iPhone launch, but its price tag and limited supply could be drawbacks China’s Huawei Technologies Co (華為) yesterday unveiled the world’s first tri-foldable phone, as it seeks to expand its lead in the world’s biggest smartphone market and steal the spotlight from Apple Inc hours after it debuted a new iPhone. The Chinese tech giant showed off its new Mate XT, which users can fold three ways like an accordion screen door, during a launch ceremony in Shenzhen. The Mate XT comes in red and black and has a 10.2-inch display screen. At 3.6mm thick, it is the world’s slimmest foldable smartphone, Huawei said. The company’s Web site showed that it has garnered more than
Demand for artificial intelligence (AI) chips should spur growth for the semiconductor industry over the next few years, the CEO of a major supplier to Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) said, dismissing concerns that investors had misjudged the pace and extent of spending on AI. While the global chip market has grown about 8 percent annually over the past 20 years, AI semiconductors should grow at a much higher rate going forward, Scientech Corp (辛耘) chief executive officer Hsu Ming-chi (許明琪) told Bloomberg Television. “This booming of the AI industry has just begun,” Hsu said. “For the most prominent
PARTNERSHIPS: TSMC said it has been working with multiple memorychip makers for more than two years to provide a full spectrum of solutions to address AI demand Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said it has been collaborating with multiple memorychip makers in high-bandwidth memory (HBM) used in artificial intelligence (AI) applications for more than two years, refuting South Korean media report's about an unprecedented partnership with Samsung Electronics Co. As Samsung is competing with TSMC for a bigger foundry business, any cooperation between the two technology heavyweights would catch the eyes of investors and experts in the semiconductor industry. “We have been working with memory partners, including Micron, Samsung Memory and SK Hynix, on HBM solutions for more than two years, aiming to advance 3D integrated circuit
RSS