Even lower interest rates and more quantitative easing would not solve the economic problems of both Europe and Japan, according to Axel Weber, chairman of UBS.
“It’s very hard to imagine that within the next two to three years central banks in Europe or in Japan can drive inflation back to 2 percent,” Weber, a former head of the Bundesbank, Germany’s central bank, told CNBC.
“That is probably going to need a lot of additional easing and that additional easing will not really help these economies to grow much faster.”
With both Japan’s and the European Union’s economies in danger of stagnation as a slowdown in China and other emerging markets leads to weaker than expected global growth, speculation is growing that the European Central Bank may cut interest rates even further. Its “discount rate” is already negative, at -0.02 percent.
Weber added his voice to the growing number calling for the U.S. Federal Reserve to start raising interest rates and gradually bring the post-credit crisis era of extraordinary monetary policy to an end. He said: “The bigger picture that is emerging is a resilient U.S. economy, with strong growth of jobs and an unemployment rate that is close to full employment and I think emergency levels of interest rates, as I said, are no longer warranted.”