The European Central Bank (ECB) raised interest rates again by 0.25 percentage point and the increases will not stop there. The president, Christine Lagarde, left no doubt at a press conference that the increases will continue and as early as next month. “It is very likely that we will continue to raise interest rates in July,” said Lagarde.
Unlike the US Federal Reserve, which yesterday announced the maintenance of its rates, the ECB is not following the same path. “As far as the ECB is concerned, we will continue to rise [taxas de juro]we don’t think about taking a break,” Lagarde stressed.
More than that, Lagarde said there is “ground to cover” and that “we haven’t started to think about it yet because we have work to do”.
The ECB’s priority is to bring inflation down to 2%, and Lagarde insists they are “determined to reach the target in due time”. The thing is, if there are indicators that show a reduction in inflation, there are others that don’t. “We have to have faith in that [a inflação] on the way down”.
One factor behind “persistent inflation has a lot to do with unit labor costs,” Lagarde said. “The labor market situation is good news for Europe. Unemployment levels will continue to fall. We see wages continuing to rise in the future,” he stressed, but without ruling out a “salary spiral”.
Regarding the decision taken today by the Board of Governors, the ECB leader said it was a “harmonious discussion, quite deep in terms of the labor market”, and that there was “a very, very broad consensus”.
The ECB also confirmed today that reinvestments under the APP program will cease from July, after being cut by €15 billion per month in recent months. The decision taken in March has been “well accepted by the market”, according to Lagarde.
Regarding the asset purchase program in response to the pandemic emergency (the PEPP), the Governing Council says it will continue to reinvest in these securities “at least until the end of 2024”. And it ensures that “future phasing out of the PEPP portfolio will be managed to avoid interfering with the appropriate monetary policy orientation.”
Source: DN
