(Bloomberg) -- Benoit Coeure, a contender to become the European Central Bank’s next president, said it’s too early to judge whether the institution will raise interest rates in 2019.
Speaking in Davos, the ECB Executive Board member told Bloomberg TV that the currency bloc’s persistent economic weakness “has surprised us” and officials will need time to decide how to react. The central bank kept policy unchanged on Thursday, affirming that rates will remain at current levels at least through the summer -- despite investors betting that borrowing costs won’t start rising until next year.
“We’re saying we’re not going to move before through the summer. We could change it, we could extend it,” Coeure said at the World Economic Forum. “If at some point we see market expectations which don’t fit the way we see the economy, then we would have to react, and we would adjust our guidance. And we may have to do it at some point.”
Asked whether the ECB will be able to increase interest rates this year, he said “it’s too early to have that discussion because we’re still understanding the nature of the shock.”
Economic data for the 19-nation region have disappointed recently as weaker growth in China and persistent trade tensions took their toll on external demand. UBS Group AG President Axel Weber, a former ECB policy maker, said in Davos this week that the central bank has already missed its chance to normalize policy in this cycle.
Other major central banks are also taking a step back -- even the U.S. Federal Reserve has signaled it could pause rate hikes. The broad shift in sentiment prompted the ECB to change its assessment of risks to the outlook for euro-area growth on Thursday.
“We say they’ve moved to the downside because these risks to global trade have materialized,” Coeure said. “A lot of the uncertainty is political, has political sources, first and foremost global trade.”
The 49-year-old Frenchman is considered a possible choice to lead the ECB when President Mario Draghi steps down in October, though he’d have to overcome the hurdle that his own board term, which ends in December, is supposed to be non-renewable.
Asked if he’d like to be head of the central bank, he answered “who wouldn’t?” but said it’s not his decision to make.
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