ECB’s Nowotny Warns of Stagnation Risk

The biggest problem facing the euro zone is a long period of stagnation, a member of the European Central Bank’s governing council said Tuesday.

“If you fear something you should fear the right thing. It’s not inflation, it is stagnation that is the real danger,” said Ewald Nowotny, who is also the governor of Austria’s central bank.

Mr. Nowotny’s comments come after the ECB last week cut its benchmark interest rate to a record low, a move that was criticized by some countries, such as Germany.

The rate cut needs to be seen in the larger economic context, Mr. Nowotny said, as it will help to increase real incomes especially for low-income earners.

Central banks have been “pushing conventional instruments up to the limit” in fighting the debt and financial crisis, Mr. Nowotny said at a conference in Vienna.

via MarketWatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza