Germany calls on ECB to unwind economic stimulus

The European Central Bank should begin winding down its expansive monetary policy in 2017 as inflation returns in the eurozone, German Finance Minister Wolfgang Schäuble said in an interview on Friday.

Germany calls on ECB to unwind economic stimulus
Wolfgang Schäuble has long grumbled about the ECB's policies. Photo: Kay Nietfeld/dpa
“It would probably be right if the ECB starts daring to head for the exit this year,” Schäuble told the Sueddeutsche Zeitung newspaper — although he acknowledged it would be a “difficult task”.
The ECB has fixed interest rates at record lows in the 19-nation single currency area, as well as offering cheap loans to banks and buying up tens of billions of euros per month of government and corporate debt.
The moves are designed to make more cash from the financial system available to the real economy, powering growth and investment and driving inflation towards its target of just below 2.0 percent.
German economists and political leaders have long grumbled about the policy, objecting that low interest rates hurt savers.    
With interest rates on many savings accounts lower than inflation, Germans' cash piles will shrink in real terms if prices continue to grow and rates remain unchanged.
“I share the concerns” of savers, Schäuble told the SZ on Friday, noting that inflation is expected to rise further in 2017.
In Germany, prices increased faster in December than in the rest of the eurozone, at 1.7 percent compared to an average of 1.1.
There is “ongoing evidence of German inflation picking up markedly,” IHS Markit economist Howard Archer tweeted Friday, warning that the rise would “fuel tensions with the ECB”.
Schäuble acknowledged that any exit from expansive monetary policy would be “a difficult task to solve” for the ECB, as moves that look like removing the support could spook financial markets.
The German minister also cast barbs at fellow eurozone members he sees as laggards on economic reform.
“The problem at the moment is not the ECB,” he told the SZ. “A range of member countries are not delivering what they committed themselves to, namely improving their competitiveness.”
German inflation breaking away from the eurozone average showed that “the problem is the weakness of other states, not Germany's strength,” Schäuble said.

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Norway central bank cuts rates to lowest level in 200 years

Norway's central bank cut its key policy rate to the lowest level in its 200-year history on Friday, to help balance the double blow of the coronavirus crisis and an oil price slump.

Norway central bank cuts rates to lowest level in 200 years
Norges Bank governor Øystein Olsen announcing the first rate cut on March 13. Photo: Norges/screenshot
The bank on Friday morning announced that it would cut the policy rate by 0.75 percentage points to 0.25 percent, one notch before the previous historic low of 0.5 percent. 
In an interview with Norway's state broadcaster NRK, Norges Bank governor Øystein Olsen said that the cut would not be enough on its own to protect the economy. 
“But it can help to offset some of the impact,” he said. “In particular, it will make it easier for households and companies that have debt to handle that debt in a very difficult time.” 
He said that further cuts may be necessary. “I do not exclude further interest rate reductions if the situation requires it.”
The Norwegian Krone has plunged more than a fifth against the dollar so far this month.