2023-11-28 10:00:32
The ECB, under the leadership of Christine Lagarde, continues to fight inflation in the Eurozone. The President reaffirmed the importance of maintaining high interest rates “ long enough » to stabilize prices. This statement comes in a context where inflation, although falling, remains subject to major uncertainties. The geopolitical situation, particularly in the Middle East, strongly influences the economic outlook, with potential risks on energy supply that might impact global growth and inflation levels.
High interest rates to fight inflation
Within the ECB, opinions differ regarding future monetary policy. Officials such as Bank of France Governor François Villeroy de Galhau have expressed optimism, suggesting a possible end to the rise in key rates. However, others, such as Bundesbank President Joachim Nagel, are calling for caution, warning once morest a premature reduction in rates. This diversity of opinion reflects the complexity of today’s economic challenges and the uncertainty regarding the best path forward.
The ECB has engaged in a policy of monetary tightening since July 2022, gradually increasing its key rates in response to galloping inflation. This policy has led to historically high rates, with the main policy rate at 4%. Although the last ECB meeting in October resulted in a pause in this upward trend, no sign of rate cut has been given. Lagarde insists that high interest rates, combined with slowing economic growth and the labor market, are essential to bring inflation back towards the 2% target.
Towards a rate cut in 2024?
Financial markets, however, are beginning to anticipate a rate cut from next year. This anticipation raises questions regarding the balance between the need to control inflation and the risks of prolonged monetary tightening on economic growth. The ECB therefore finds itself at a crossroads, having to juggle inflationary pressures and the repercussions of a high interest rate policy on the overall economy.
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