Roubini To ECB And Bank Of England: “Further Rate Hikes To Avoid Stagflation”

Renowned American economist Nouriel Roubini, professor emeritus at New York University’s Stern School of Business and CEO of Roubini Macro Associates, issued a stern warning to the European Central Bank and the Bank of England about “further rate hikes.”

According to Roubini, known in global financial circles as “Mr. Doom” for predicting the bursting of the US real estate bubble in 2008 and the subsequent global financial crisis, “the ECB led by Christine Lagarde and the Bank of England led by Governor Andrew Bailey must continue to raise interest rates to avoid stagflation.”

In an interview with Bloomberg Television, among the factors that threaten to push prices even higher, Roubini named for the eurozone and the United Kingdom the “strong and recent recovery in oil prices,” which Mr. Doom said was “once again fueling fear of a new rise in prices among the world’s central banks.”

When asked “why the economist takes his advice to the ECB and the Bank of England rather than to Jerome Powell’s Federal Reserve,” Roubini, a notoriously pessimistic man, replied that his fundamental concern “is that overall inflation in Europe is still growing rapidly, against the backdrop of increasingly faltering GDP growth.”

Italian portal Finanzaonline notes that the US economist’s statements come days after the international “big roundup” of announcements on rates to be made by the Federal Reserve, the Swiss National Bank, the Bank of England, and, finally, on Friday, September 22, the Bank of Japan, headed by manager Kazuo Ueda, who has so far managed to maintain negative rates against all odds.

Roubini’s “practical” advice includes a target for the Bank of England that “should raise rates to 5.75%.” Currently, the UK’s main base rates are at 5.25%, and the forecast for the meeting scheduled for Thursday, September 21, calls for an increase of 25 basis points to 5.5%.

But for Roubini this would not be enough, since inflation is running too fast both in the eurozone and in the UK, while the development of European economies is slowing down dangerously. “[This is] a classic case of stagflation, when inflationary pressure becomes stronger and economies lose momentum,” the American economist emphasized, proposing that the financial authorities of the Old Continent and Great Britain resolve the issue by “giving absolute priority to the fight against inflation.”