Former ECB adviser: “Interest rates must rise further to 7 percent”

Lex Hoogduin, advisor to the first ECB president Wim Duisenberg, is convinced that the monetary institution should raise interest rates further to 7 to 7.5 percent, compared to 3.25 percent today.

Why is this important?

The European Central Bank (ECB) started raising interest rates last summer in order to bring inflation down. The deposit rate – the remuneration that the banks receive on the money they deposit with the central banks – has since risen from -0.5 to 3.25 percent.

In the news: “If we base ourselves on the so-called Taylor rule, the ECB must raise interest rates further to 7 to 7.5 percent,” says Hoogduin.

  • The Taylor rule, introduced in 1993 by John B. Taylor, describes the interest rate as a function of developments in macroeconomic variables. “This is not ‘rocket science’, but it does indicate that the ECB is still catching up,” said the former central bank adviser.

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