Robert Holzmann is the Governor of the Austrian Central Bank and a member of the Governing Council of the European Central Bank, described by many critics as the A1 hawk at the table.
Holzmann spoke in a radio interview on Saturday with public broadcaster ORF (Österreichischer Rundfunk, “Austrian Radio”). He said that further interest rate cuts by the European Central Bank in the absence of cuts by the US Federal Reserve would have a (less) impact on the euro exchange rate and mean higher inflation:
“If the original assumption of three rate cuts comes true, and the Fed does not respond, that will certainly have an impact on the exchange rate, and with it inflation.”
On Thursday last week, the European Central Bank cut its deposit rate to 3.75% from 4%. Holzmann objected to the interest rate cut:
Holzman blamed comments made by board members before the meeting that he felt left the bank no choice but to cut:
- “The council was of the opinion that there was no other way, because it had also been announced that such a decision would be made in June.”
Hah. I do not think it is an exaggeration to suggest that ECB officials are playing down expectations of future interest rate cuts in order to limit the risks of a euro sell-off. Holzman is the one rolling on this.