ECB's Coeure: rates to diverge from UK, U.S. for years

PARIS Sat Jun 7, 2014 3:47am EDT

Benoit Coeure, executive board member of the European Central Bank (ECB), speaks during an interview with Reuters in Frankfurt February 12, 2014. REUTERS/Ralph Orlowski

Benoit Coeure, executive board member of the European Central Bank (ECB), speaks during an interview with Reuters in Frankfurt February 12, 2014.

Credit: Reuters/Ralph Orlowski

Related Topics

PARIS (Reuters) - Euro zone interest rates will diverge from those in the United States and Britain for a number of years, European Central Bank (ECB) Executive Board member Benoit Coeure told France Inter radio on Saturday.

Speaking after the ECB this week cut rates to record lows, Coeure said they would remain around that level for a long time, whereas central banks in the United States and UK would at some point raise rates.

"Clearly what we wanted to indicate on Thursday is the fact that monetary conditions will diverge between the euro zone on one hand and the United States and the United Kingdom on the other for a long period, which will be several years," he said.

"We are going to keep rates close to zero for an extremely long period, whereas the United States and the United Kingdom will at some point return to a cycle of rate rises."

Coeure said this should help to weaken the strong euro, which is threatening economic recovery and importing disinflation. French President Francois Hollande has been calling for months for ECB action to weaken the currency.

The ECB on Thursday lowered its main refinancing rate to 0.15 percent and launched a series of measures to pump money into the sluggish economy, pledging to do more if needed to fight off the risk of Japan-like deflation. [ID:nL6N0OM3BH]

The Bank of England this week left its benchmark interest rate at 0.5 percent - where it has sat since the worst of the financial crisis more than five years ago - despite a strong recovery and fast-rising house prices.

Forecasts from the Bank published in May showed gradual interest rate rises starting in about a year's time would be consistent with its 2 percent inflation target. Martin Weale, the Monetary Policy Committee member most likely to cast a first vote for a rate hike, said recently that borrowing costs should go up sooner rather than later.

The U.S. Federal Reserve, meanwhile, is not expected to raise rates until July 2015, based on CME FedWatch, which tracks rate hike expectations using its Fed funds futures contracts.

(Editing by David Holmes)


After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Recommended Newsletters

Reuters U.S. Top News
A quick-fix on the day's news published with Reuters videos and award-winning news photography and delivered at your choice of one of four times during the day.
Reuters Deals Today
The latest Reuters articles on M&A, IPOs, private equity, hedge funds and regulatory updates delivered to your inbox each day.
Reuters Technology Report
Your daily briefing on the latest tech developments from around the world from Reuters expert tech correspondents.