VIENNA (Reuters) - Plans for European Union finance ministers and central bankers to discuss an interest rate increase this week are not an attempt to influence the European Central Bank, EU presidency incumbent Austria said.
As holder of the bloc’s rotating presidency for the rest of the year, Austria will host the discussion on “financial stability implications of increasing interest rates” when policymakers meet in Vienna on Friday and Saturday, a document seen by Reuters said.
Talks on coping with normalized monetary policy would not be abnormal, but sending a message to the ECB would be highly unusual, and seen as an encroachment on the bank’s prerogative to set borrowing costs for the bloc.
Austrian Finance Minister Hartwig Loeger said putting pressure on the ECB was not his country’s intention.
“In no case will the council (of finance ministers) steer the ECB’s monetary policy or influence its decisions,” Loeger told reporters when asked about the planned discussion.
The ECB has kept rates record low for years as inflation remains below its target rate, brushing off critics, including Austria’s own central bank chief.
Policymakers in the bloc’s core states argue that inflation is already high enough for rates to rise, but ECB chief Mario Draghi says it sets policy for the euro zone as a whole and not just its wealthier members who have already recovered from the bloc’s crisis.
While the ECB has already unveiled plans to end its purchases of government bonds this year, it said that interest rates will remain on hold for at least for another year.
Rather than seeking to lean on the ECB, Austria wanted finance ministers to be well prepared for an increase in rates before it happens, Loeger said.
“The ECB has signaled that a normalization of monetary policy will take place in 2019. It is clear that this will affect states’ refinancing and the economy,” Loeger said.
“It is therefore essential to grapple with the resulting questions at an early stage and to identify potential fiscal policy measures.”
Reporting by Francois Murphy