ECB coy on rates and wary of lingering Brexit threat
European Central Bank policymaker Klaas Knot has said he does not expect interest rates to fundamentally change in the coming years.
“I don’t see any move towards fundamentally different rates in the coming years,” Mr Knot said.
Rates could go up again, the Dutch central bank governor said, but, for now, are being kept historically low by an abundance of savings and by a structurally low inflation rate in the eurozone.
Mr Knot also warned of the lingering threat of a ‘no-deal’ Brexit at the end of this year, which, he said, could lower economic growth in the Netherlands by 0.5%.
“The imminent threat of a no-deal Brexit, on January 31, is negligible,” Mr Knot said.
“But the Brexit risk has only been postponed, as it seems impossible to have a comprehensive trade agreement that includes financial services in 11 months.”
Britain, meanwhile, has said it will set out more details about its objectives for a free trade deal with the EU next month, after the country leaves the bloc at the end of this month, according to Brexit secretary, Stephen Barclay.
“We are going to publish our objectives for the negotiation...in due course, after the 31st,” he said.
At stake are the terms of trade from 2021, when an 11-month, post-Brexit transition period is due to expire. Negotiations between London and Brussels are expected to start in March.
The key issue is that we will have control of our rules, we will not be a rule-taker, we will not diverge for the sake of diverging, we start from a position of alignment.
The European Commission will thrash out its objectives next month, before putting them to EU governments on February 25.
Mr Barclay reiterated the UK’s ambition to agree a “zero-tariff, zero-quota, broadly ambitious trade policy” with the EU, while working to strike deals with other countries around the world, including the US.
US Treasury secretary, Steven Mnuchin, said, at the weekend, that he was optimistic the US and Britain would strike a trade deal this year.
