"The Fed Raised Its Key Interest Rate, Europe Won’t Follow Suit in 2017"

The US Federal Reserve raised its key interest rate by 0.25 per cent, to a range of 0.5 to 0.75 per cent. Professor Friedrich Heinemann, head of the "Corporate Taxation and Public Finance" Research Department at the Centre for European Economic Research (ZEW) in Mannheim, comments on the decision.

"The US Federal Reserve decided to raise its benchmark rate, a move which Europe won’t follow suit in 2017. The European Central Bank (ECB) currently has no leeway. The inflation rate in the eurozone still remains well below the two-per-cent target rate. And the recent uncertainty surrounding Italy’s debt of EUR 2.2 trillion, as well as its high level of non-performing loans on banks’ balance sheets, renders interest rate hikes much too risky.

The ECB has ultimately been caught in a trap set by the national governments' high debt levels and their inability to reform. Instead of blaming ECB President Mario Draghi for zero and negative interest rate policies, savers should rather find fault with Rome, Paris and other capital cities."

For more information please contact

Professor Friedrich Heinemann, Phone +49(0)621/1235-149, E-mail heinemann@zew.de