FED: Ifo’s Sinn favours US interest rate hike, ECB should follow

Ifo President Hans-Werner Sinn has called on the US Federal Reserve to raise its interest rates on Thursday.

“The fact that interest rates are practically zero means that the interest rate has lost its controlling function of differentiating between profitable and unprofitable assets. That is bad news for the economy, as it suggests that resources are not in short supply, which is not true,” Sinn said.
“And excessively low interest rates lead to speculative bubbles that subsequently burst and can get banks into serious trouble,” he added.
Sinn also asked the European Central Bank to reconsider its interest policies, should the US decide to increase rates.
“The alarming carelessness of banks in granting loans is based on historically low interest rates. When the bubbles burst, taxpayers have to foot the bill. At the moment low interest rates are enabling zombie banks to survive until the banking union partially mutualises their debts,” warned Sinn.