Draghi Will Miss His Chance to Raise Interest Rates, Nordea Says

ECB's QE Pledge Said Facing Policy Maker Challenge

Mario Draghi’s tenure as European Central Bank president will end without a single interest-rate increase, according to economists at Nordea Bank.

The ECB won’t raise any of its key policy rates until December 2019, said Holger Sandte, Jan von Gerich and Tuuli Koivu in a note. They previously foresaw a rate hike in the first quarter of that year. Draghi’s term runs until the end of October 2019.

While the ECB agreed at last month’s meeting to extend its bond-buying program to at least September 2018, at 30 billion euros ($35 billion) a month, it also said it’ll keep going until inflation is back on track toward its goal of just under 2 percent. Nordea says that muted price pressures will warrant another extension until March 2019 at a reduced monthly pace of 15 billion euros.

The ECB’s intention to keep rates at current levels until “well past” bond-buying stops probably translates into a six-month wait, Nordea says. So its predicted quarter-percentage point increase would be announced by Draghi’s as-yet-unknown successor. The Italian has been in the job since 2011.

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