Michael Kemmer: Fed further normalising monetary policy
“With yesterday’s interest rate decision, the US Federal Reserve firmly underlines that the US economy is in good shape,” said Michael Kemmer, general manager of the Association of German Banks. At 4.7%, unemployment was as low again as in the boom phase around ten years ago, and economic growth of close to 2.5% was expected in the US in the current year. “Given that the inflation rate is also picking up a little, there would have been no reason not to take another step towards normalising monetary policy,” he concluded.
Mr Kemmer pointed out once again that the crisis mode in monetary policy shouldn’t be a permanent state of affairs in Europe either. Many observers overlooked the fact that the economy in the euro area had been back on the growth track for the past four years. “So neither negative interest rates nor a monthly multi-billion-euro asset purchase programme go together with the economic growth of around 1.7% forecast for this year and an inflation rate at a similar level,” Mr Kemmer said.
The Association of German Banks’ general manager believed that an increasingly urgent warning was now called for: “The longer the ECB remains in monetary policy crisis mode, the more the risks and unintended effects of this policy will increase – ranging from distorted risk pricing and misallocation of capital to threats to financial stability and substantial interest rate risk.”
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