Here’s Why the Threat of Rising Bank Rates Worries Mario Draghi
The European Central Bank’s chief Mario Draghi is attempting to talk market interest rates out of rising, Reuters reports. Draghi will be meeting with the ECB this Thursday to discuss a possible rate change.
After the ECB declared that it would not be raising rates for an extended period in July, some had speculated that the upcoming meeting would lead to a further rate cut. However, a recent upsurge in good economic news for the Eurozone has led most to abandon their predictions and has driven market interest rates upwards. For Draghi and the ECB, this has created concerns that even though the ECB has stated it has no intention to raise rates in the near future, many borrowers in the private markets will be subjected to higher interest rates, which could in turn check a potential economic recovery in the Eurozone.
In addition, some investors have expressed skepticism at the ECB’s promise, citing rumors of tapering quantitative easing from across the Atlantic as well as the ECB’s complete lack of the use of forward guidance up to this point.