Recently, Ivo Arnold, Professor of Monetary Economics at Erasmus School of Economics, was asked for his expertise on the Dutch radio station NPO Radio 1. The European Central Bank (ECB) has already raised interest rates nine times in a row: should interest rates go up again, or is it enough now?
The decision of whether to raise or lower interest rates is a very tricky one. Still, certain factors such as low projected economic growth suggest that it is not wise to raise interest rates further now, Arnold says. On the other hand, inflation is still forecast to be too high next year, threatening to push the economy into stagflation: low economic growth combined with too high inflation.
Another issue raised by the professor is the reputation of the European Central Bank. According to Arnold, the ECB should be careful not to be seen as the weakest western central bank. This is because the ECB started raising interest rates very late and if the increase is paused now, it could have a negative effect on their reputation.
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You can listen to the full podcast from NPO Radio 1, 11 September 2023, here.