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--First Hike Could Come Before APP Reinvestments End
By Chris Mc Innes
BERLIN (MNI) - A first interest rate increase in mid 2019 seems plausible
and could happen before the European Central Bank ends reinvestments under its
Asset Purchase Programme, Bundesbank president Jens Weidmann said in a speech
Speaking at a think tank in Mannheim on the importance of central bank
communication, Weidmann said that, "market participants expect a first interest
rate increase around mid-2019, which seems to me not entirely unrealistic."
He explained that the first interest rate increase was likely to happen
closer to the end of the net purchases compared to the normalisation path taken
by the US -- where the Fed hiked rates a year after ending QE -- because the
Eurozone is at a more advanced stage of the business cycle than the U.S. was at
The Bundesbank head also highlighted that the Federal Reserve hiked rates
for the first time after the end of QE before the end of its reinvestments. He
added that, "most market participants expect a similar sequencing and the ECB
governing council has so far seen no reason to correct these expectations."
Nevertheless, he stressed that the pace of interest rate increases and the
end of the reinvestments under the APP were dependent on the path of inflation.
--MNI London Bureau; tel: +44 203-586-2225; email: email@example.com