The IFO ‘think tank’ does not support an ECB rate hike – Bloomberg
A possible interest rate hike by the European Central Bank “doesn’t make much sense,” as high energy and food prices are unlikely to trigger broad-based inflation amid a cooling economy, Ifo think-tank economist Gernot Nerb told Bloomberg TV Monday.
Nerb said the ECB isn’t capable of controlling the volatile pricing of food and energy products and shouldn’t increase its interest rate, because an already cooling economy will also ease price pressures.
ECB President Jean-Claude Trichet recently signaled that the rate-setting governing council could raise interest rates to 4.25% from 4% at its July 3 meeting, to combat high inflation.
German business confidence sharply deteriorated in June in the wake of record-high oil prices and a weaker export outlook, a survey from the German Ifo Institute showed earlier Monday.
The Ifo business climate index fell to 101.3 from 103.5 in May, well below economists’ forecasts of 102.3.
Nerb said high energy prices are responsible for weakening business expectations, while the strong euro isn’t as much of a problem.
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