Will the ECB have to go beyond forward guidance?
The refinancing rate is zero, they could introduce negative rates on
deposits but not too negative ones: Maybe –0.1%, but not –1%, otherwise
they create problems in money markets. And such a cut won’t make a
difference. I think the ECB will end up in QE next year, because even
the introduction of negative rates won’t prevent the Euro from
appreciating: the current account is in a large surplus, the tailrisks
of the Eurozone have been reduced, so the money is flowing back. These
fundamental pressures remain. So, the only escape is outright QE.
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics
