Further rate hikes in sight in 2023. After four consecutive rate hikes since July, the monetary policy tightening by the European Central Bank (ECB) is not going to stop. Main voice of the “hawkish” camp of the ECB, which is at the origin of the rise in the rates observed in the euro zone since July, Isabel Schnabel, member of the executive board of the European Central Bank, has, in an interview Saturday with the newspaper German Frankfurter Allgemeine Zeitung, opened the door this weekend to another rate hike to bring inflation down. In particular the deposit rate, the one at which it remunerates bank deposits with the ECB, which might increase more sharply than expected if inflation estimates so require. “Whether we have to go even higher will depend on the outlook for future inflation,” she told the newspaper.
Still negative in the spring, the deposit rate is between 1.5% and 2%, and investors now expect it to hit 3.4% next year, from a peak of 2.75% previously anticipated.
Isabel Schnabel added that the ECB will focus on medium-term inflation forecasts, rather than current figures, and that it sees little risk of raising borrowing costs too sharply at this time. since real interest rates are still very low.
Independence
Three Italian ministers have criticized the ECB’s latest move, which has sent borrowing costs for heavily indebted Italy soaring. Isabel Schnabel believes that the ECB should resist the pressure.
“We can expect increasingly strong reactions and we must resist them,” she said, as quoted by Frankfurter Allgemeine Zeitung. “That’s exactly why central banks are independent.”
In a message of greetings sent Friday to Europeans worried regarding their purchasing power, the President of the European Central Bank Christine Lagarde, “promised” that the institution will do “everything possible” to fight inflation and “will succeed”. »,
“We are raising interest rates and we will raise them further, at a steady pace, until they are at a level that ensures a rapid return of inflation to our medium-term target of 2%,” said Christine Lagarde. “And we will succeed,” she added.
Inflation hurts the poorest
Since July the ECB has raised rates at the fastest pace ever recorded, raising them by a total of 2.5 percentage points, including 0.5 points in December with the firm intention of continuing the movement.
High inflation “harms everyone, especially the poor,” said the former French economy minister.
Interest rate increases of 50 basis points might “become the new normal in the short term” and “for a while”, for his part reaffirmed to the newspaper Le Monde the vice-president of BCE Luis de Guindos. Gone are the days when; at the end of 2021, Christine Lagarde still affirmed that the rates were most likely not going to be raised during the year 2022, while the inflation which was beginning to quiver was still perceived as a temporary phenomenon.
But “Russia’s horrific war once morest Ukraine and its people” launched in February, with its attendant human suffering, has “pushed up energy prices, also causing inflation to spike across the country.” ‘Europe’, peaking at nearly 11% in the fall in the euro zone.
