Lorenzo Bini Smaghi, a former European Central Bank policymaker, said the bank should either delay or pare back this week’s planned interest-rate increase.
Her remarks, however, came before the collapse of Silicon Valley Bank, which has rattled global markets and prompted investors to dial back bets on monetary tightening on concerns over financial stability.
The former central banker, who is now chairman of Société Générale, made the parallel with 12 years ago, when the ECB raised borrowing costs only to undo the move as sovereign-debt turmoil engulfed the euro region.“The ECB should avoid repeating the 2011 mistake, when it continued hiking rates without taking into account the growing contagion from the Greek debt restructuring,” the newspaper quoted Mr Smaghi as saying.
Traders’ bets are currently pricing a less than 50 per cent chance of a half-point increase compared with almost 100 per cent earlier.
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