New Austrian central bank head sets out hawkish line for ECB

The International Board of Directors is holding the following policy meeting on September 12, promising a stimulus package that is expected to weaken economic growth due to the outbreak of the global trade war and the German manufacturing sector already in recession.

The flag is a picture in front of the European Central Bank (ECB) headquarters in Frankfurt, Germany on July 25, 2019.

The flag is a picture in front of the European Central Bank (ECB) headquarters in Frankfurt, Germany on July 25, 2019.

Robert Holzmann, president of the new Austrian State Bank, expressed his hawkish stance before saying that before the first meeting as a policymaker for the European Central Bank, enhanced monetary stimulus for the Eurozone would pose more risk than profit. .

Holzmann, 70, is a pension specialist working for the World Bank and the International Monetary Fund. The man he succeeded in Ewald Nowotny, the governing committee of OeNB and ECB, has a hawkish reputation.

Holzmann, who acquired Novotny on September 1, said in an interview with ORF, an Austrian broadcaster that aired on Saturday, he confirmed his policy position with OeNB employees.

"I would probably say a somewhat more important position with regard to the proposal for further deepening of the currency footprint," he said.

"Cheap money has its charm, but it has its limitations, especially when it lasts for a long time."

As a monetary policy novice, Holzmann said that his background as an economics researcher and professor worked for him, and he made more hawks than doves.

Holzmann said earlier in the decade that the ECB's policy easing and government bond purchases were important to conserving the euro. But most of this work was done, and the balance sheets of the ECB and the Eurozone central bank were full of such assets.

"The potential for additional (positive) effects is very small. On the other hand, the low rates themselves are at risk of incorrect allocation of resources and incorrect allocation of prices, leading to a significant increase in short-term and long-term risks associated with them."

"This can be seen in real estate prices, gold prices and irregular stock prices. The long-term impact can be very negative for Europe and the world," he said in a Saturday interview.

This low interest rate environment was the most favorable to the debt-rich countries, but he said, financially conservative countries like Germany and Austria offer the possibility to increase spending.

Holzman said people should get used to simply lowering growth, inflation and interest rates. "We probably won't come back quickly to the (high) level of the postwar era," he said.

Holzmann, a politically independent country, said, "It's generally skeptical about negative interest rates."

Most of the risks to the Austrian economy have been seen abroad, for example, as Germany's economic slowdown has moved to Austria's main trading partner, Eastern Europe, but this scenario is manageable.

Source: TRTWorld and Agencies

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