Deutsche Bank urges ECB to raise rates

Frankfurt:  The European Central Bank should end its easy-money policy to avoid inflating market bubbles and relieve struggling eurozone lenders, Deutsche Bank chief John Cryan said yesterday.
ECB policymakers have set interest rates at historic lows and pumped over ¤2.0 trillion ($2.4 trillion) into the economy by buying government and corporate bonds, which Cryan said had helped banks recover from the financial crisis but “also brought fresh turbulence”.
“We are now seeing signs of bubbles in more and more parts of the capital market where we wouldn’t have expected them,” he added.
What’s more, “interest rate policy has been partly responsible for the decline in earnings at European banks” to just 23 percent of their pre-crisis levels, Cryan said.
The problem is worsening as more and more loans issued at higher interest rates in the past are paid off.
Competing American banks benefit from higher interest rates in the United States, increasing their net interest income bz 8.0 percent in the first half of 2017 compared with a 2.0-percent decline in Europe, Cryan said.
However, policymakers are leery of scaling back supportive measures just yet, as inflation remains short of the ECB’s target and the economy confronts a braking effect from the euro’s appreciation to almost $1.20.