Higher U.S. interest rates could benefit Eurozone: German research institute

Higher U.S. interest rates might have a positive effect on the European economy as the weakening of the euro will cheapen exports to the U.S. and imports will become more expensive, the Cologne Institute for Economic Research (IW Cologne) said in a commentary article released on Monday.

As a result, the inflation rate in the euro area might move upwards, which would ease the pressure on the European Central Bank (ECB) to strengthen its policy measures against low inflation.

Just one and half weeks ago, the ECB decided at its last governing council Meeting this year to extend its asset purchase programme by an extra nine months to the end of 2017 or beyond, implying to pump more money into the eurozone economy, in order to drive inflation and growth back up.

In view of further increase of the inflation rate in the euro area, the IW Cologne argued, "there might also be an interest rate turnaround for the Eurozone on the table."

Member of the Executive Board of the ECB Peter Praet said earlier the U.S. economic recovery is far more advanced than in the euro area, unemployment is lower and the rate of inflation is higher, which enable U.S. economy to cope with higher interest rates.

However, the euro area "has not got that far yet", he added.

(APD)