ECB chief economist warns: Could represent a “financial shock for the euro”.

The European Central Bank (ECB) will, according to its chief economist Philip Lane, for the time being no change in interest rates debate if the economy stays on track. However, new messages such as a possible deviation from its course by the US Federal Reserve could cloud the outlook, Lane told the Italian newspaper The Press on Friday. It would be economically difficult for the Eurozone if inflation in the USA did not return to the target value.

A reassessment of the future role of the dollar could also be “a kind of Financial shock for the euro“. The background is the increasing pressure from the US government on the head of the central bank Jerome Powell.

The US Department of Justice has opened an investigation into Powell over cost overruns on a renovation project. Powell denies the allegations and described the actions as a pretext to impeach him because of US President Donald Trump to put pressure on the requested interest rate cuts. Trump said on Wednesday that he had no immediate plans to fire Powell but was already considering a successor.

Cooperation with Fed “as usual”

ECB Vice President Luis de Guindos highlighted the importance of the Independence from central banks emphasized. However, he assured that cooperation with the Fed was “normal and as usual.” So-called swap lines for exchanging currencies between central banks are positive for financial stability on both sides of the Atlantic.

According to ECB chief economist Lane, there is no short-term interest rate debate under these circumstances. “The current interest rate level delivers that Basis for the next few years“, said Lane. He was confident that inflation in the 21-nation euro zone would stabilize at two percent over the long term. In addition, the euro zone is likely to experience a stronger cyclical recovery this year and next.

The ECB has kept interest rates stable since the end of a rapid rate-cutting cycle in June. She signaled last month that she was in no hurry to change her policy again.