Austerity Will Push Euro to $1.50 by Year End: Economist

The euro will keep rising and will likely end the year at up to $1.50, as the European Central Bank pursues a highly deflationary policy, despite buying euro-denominated bonds, economist Warren Mosler, founder and principal of broker/dealer AVM, told CNBC.com.


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The ECB's cash is now dictating euro zone members' fiscal policy, Warren Mosler said.

Mosler, who predicted that the euro would bounce back towards $1.60 in June, when the single European currency was trading at around $1.19, said there was nothing to stop the euro's [EUR=X 1.3942 0.0013 (+0.09%) ] appreciation versus the dollar, short of a policy response from the European Central Bank.

"If it (the euro) keeps going at the rate it's going, it could go to $1.45-$1.50 by the end of the year," he said.

The ECB started buying government bonds belonging to distressed euro zone members such as Greece, Ireland, Portugal and Spain to ease market concern regarding these countries' ability to fund themselves and some analysts have said the measure may be inflationary.

But the policy is, if anything, deflationary because it is accompanied by tough austerity conditions, Mosler said. Read more