"Historical turning point": Deutsche Bank boss Sewing also sees the ECB on the way to a turnaround in interest rates

Created: 2022-02-09 10:01 am

The head of Deutsche Bank expects the ECB to turn around interest rates.

© Hauke-Christian Dittrich/dpa

Deutsche Bank boss Christian Sewing also expects the turnaround in interest rates in Europe.

In view of the forthcoming change of course in the USA, the ECB will have to follow suit, he said on Wednesday.

Frankfurt - From the point of view of Deutsche Bank boss Christian Sewing, the central banks have to brace themselves against the skyrocketing inflation with interest rate increases.

"Central banks worldwide will have to take countermeasures," said Sewing on Tuesday at the bank's digital New Year's reception.

In the USA it is considered agreed that the Fed will raise interest rates for the first time in March.

“By the end of the year, our economists expect at least three further steps.

And the ECB will also have to follow suit," said the head of Germany's largest financial institution.

ECB dampens expectations of course change

In view of the increased risk of inflation, the European Central Bank (ECB) backed off a bit last week from its refusal to turn around interest rates this year.

After Thursday's Council meeting, ECB President Christine Lagarde did not repeat her earlier statement that an increase in 2022 was very unlikely.

The ECB will now carefully evaluate the data coming in and then make a decision in March, she said.

However, Lagarde left open whether the ECB will then switch to a tighter line.

"I would call this a historic turning point after the euro zone has lived de facto interest-free for more than a decade," Sewing said.

The analysts at his company expected the ECB to raise interest rates in the fourth quarter.

"Of course that can't mean shooting up, it has to be done in a balanced way because of the debt situation we have in European countries," Sewing said.

Deutsche Bank: High debt levels are worrying Sewing

The Deutsche Bank boss is worried about the high debts of companies, states and private individuals worldwide.

As early as 2020, the mountain of debt worldwide was higher than ever at a total of 226 trillion US dollars.

And in 2021 it went further up.

"This debt burden is simply unsustainable and a constant potential source of fire for global financial markets," he warned.

Deutsche Bank: Skepticism about EU-wide deposit insurance

Sewing also commented on the controversial issue of common deposit insurance for savers in Europe*.

The Federal Association of German Banks (BdB) also made proposals in this regard, in order not to have mutual deposit insurance, but to have liquidity protection as a first step, he said.

"I think it's now about making the right compromises." The prerequisite for a deeper capital market is the completion of the banking union.

Federal Finance Minister Christian Lindner (FDP) was rather cautious about this at the event.

"Personally, I believe that it is not recommended in terms of regulatory policy to create a common deposit insurance scheme in Europe, but that there is always a strong national component," he said.

Ultimately, the individual member countries are also responsible for their private banking sector.

"Just as we can't want sovereign debt mutualisation, for regulatory reasons, we can't want full private sector risk mutualisation," he said.