Thursday, March 03, 2011

ECB To Raise Interest Rates?

Somewhat surprisingly, the ECB signals that it might raise the official short-term interest rate next month. Given its measures to help struggling countries like Ireland and Greece I didn't think that they would make such a move since that would make the situation for the weak countries worse.

However, if the ECB wanst to tighten monetary conditions generally while helping the striglling countries then general rate hike combined with a switch of assets from financial corporate assets in countries like Germany to government bonds in countries with debt problems would make sense.