ECB Could Tighten Differently: Austrian Council Member

Picture source: Reuters.

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.

“Central bankers should be interested in the cause and not in their own money.”

Ewald Nowotny, Austrian ECB Council Member

On the topic of the succession of ECB President Mario Draghi, whose term expires in 2019, Mr. Nowotny said that decisions were being made “in the political sphere,” and they were out of the hands of the central bank chiefs.

Mr. Nowotny said he assumes that it will be a selection process between the most qualified. When it comes to the most likely picks, Germany’s central bank president Jens Weidmann and his French colleague François Villeroy de Galhau rank up there, “no doubt about it,” Mr. Nowotny said.

Jens Weidmann is a “highly valued colleague,” Mr. Nowotny said, and the Austrian National Bank has very close relations with the German central bank, the Bundesbank.

Mr. Nowotny also spoke to the remuneration of central bankers. Fed chair Janet Yellen earned around €180,000 ($193,200), and Mario Draghi makes about €390,000, comparatively low salaries compared with the CEOs of major corporations.

Being a central banker is an “honor,” Mr. Nowotny said. “Central bankers should be interested in the cause and not in their own money.”


This article’s headline was corrected Friday morning to say the ECB could tighten monetary policy in a different way to the U.S. Federal Reserve, rather than that a rate hike could be on the way.

Hans-Peter Siebenhaar is Handelsblatt’s correspondent in Vienna, Austria. Jan Mallien covers monetary policy for Handelsblatt out of Frankfurt. To contact the authors: siebenhaar@handelsblatt.com and mallien@handelsblatt.com

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