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ZEW Expert Friedrich Heinemann on the Fed's Interest Rate Decision

Date

15 Dec 2016

Sections

Euro & Finance

"The Fed Raised Its Key Interest Rate, Europe Won’t Follow Suit in 2017"

The US Federal Reserve raised its key interest rate by 0.25 per cent, to a
range of 0.5 to 0.75 per cent. Professor Friedrich Heinemann comments,

"The US Federal Reserve decided to raise its benchmark rate, a move which
Europe won’t follow suit in 2017. The European Central Bank (ECB) currently
has no leeway. The inflation rate in the eurozone still remains well below
the two-per-cent target rate. And the recent uncertainty surrounding
Italy’s debt of EUR 2.2 trillion, as well as its high level of non-
performing loans on banks’ balance sheets, renders interest rate hikes
much too risky.

The ECB has ultimately been caught in a trap set by the national
governments' high debt levels and their inability to reform. Instead of
blaming ECB President Mario Draghi for zero and negative interest rate
policies, savers should rather find fault with Rome, Paris and other
capital cities."

For more information please contact:
Professor Friedrich Heinemann, Phone +49(0)621/1235-149,
E-mail heinemann@zew.de

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