The European Central Bank (ECB) could be heading away from loose monetary policy in a different manner than the U.S. Federal Reserve, Ewald Nowotny, the Austrian ECB council member, told Handelsblatt in an exclusive interview.
The American model was to finish bond purchases first, but the ECB might not follow that model exactly, said Mr. Nowotny, who also serves as the Austrian National Bank governor. All interest rates also wouldn’t have to be increased simultaneously nor to the same extent, he added.
“The ECB could also raise the deposit rate earlier than the prime rate,” Mr. Nowotny said. He warned against trying to compare the actions of the U.S. Federal Reserve to the ECB.
“One must be aware that the U.S. is in a different phase of the economic cycle than the euro zone. In the U.S., the inflation rate and capacity utilization are significantly higher than in the euro area. Europe is not yet ready.”
Though the economic outlook is currently better than it has been in years for the euro zone, it’s not out of the woods yet, according to ECB chief economist Peter Praet. “And we have not yet seen the strengthening recovery lead to a sustained increase in inflation dynamics,” Mr. Praet said at a press conference on Thursday in Brussels.