EX ECB president advices Fed on rate hikes against IMF


15 September, AtoZForex.com, Lagos – With the highly anticipated Fed rate decision just two days away, many experts have been publicizing their view on the way to go. The latest of which is the former European Central Bank (ECB) President Jean-Claude Trichet, who has advised chair Janet Yellen to ignore the International Monetary Fund (IMF) and World Bank’s warnings. He believes all options as regards Fed on rate hikes should be kept open.

Both the world bank and the IMF have advised the Fed against rate hikes, asking it to wait till the world economy looks more firm. Around the same period, worries over the state of China’s economy sent global markets into a frenzy.

Trichet’s view

A rate hike this week is not expected to catch anyone off guard. Former ECB president said:

“The Fed has to be independent of the self-appointed good advisers,” Trichet told CNBC on Tuesday. “It is part of the credibility of the monetary policy.”

 

“They can give good advice on a more medium term basis, but not on a precise decision at a certain moment,” Trichet said. “I really think it is not their mandate, to do that.”

“They were, in my opinion, very clear in warning the market that an increase of rates was likely, so nobody would say in the market that they were not warned in advance.”

Also speaking about the state of the Eurozone economy, Trichet believes the Euro is trading at a fair price. He also pointed that further monetary easing by the ECB shouldn’t come as a surprise to investors either.

“It’s not new because since the very beginning when QE was started, it was clearly said it would go up to September 2016, and over and above this deadline if need be,” he said.

“The legacy of the sovereign risk is progressively being eliminated, and it’s clear that when you look at Spain, Spain is growing now and quite correctly, Ireland is growing, Portugal is growing,” he said.

“You have Greece which is a special case, but those who were in the heat of the crisis, now the hard work has been done and the adjustment is paying off now in terms of growth and job creation,” he added.

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