The president of the European Central Bank (ECB) said on Thursday that the intention to raise interest rates by another 50 basis points in March “is not an irrevocable commitment” and suggests further rate hikes will come later.
The ECB decided today to raise its key interest rates by 50 basis points, bringing the MRO rate to 3%.
This was the fifth consecutive increase and the central bank has indicated that it will approve a further increase of 50 basis points at its meeting in March.
In a press conference held after the meeting, the institution’s president, Christine Lagarde, said there was “broad consensus” on the Board’s decision on today’s increase and its intention regarding March’s.
Lagarde stressed that more significant rate hikes are needed to bring inflation back to the ECB’s target of 2%.
When asked if the cycle of increases will be complete after March, Lagarde said no.
While the decision is not irrevocable, “current scenarios” regarding inflation suggest that the time has not yet come to slow down the cycle of increases, he stressed.
“We know we still have a way to go, we know it’s not over yet,” he reaffirmed, referring to the path destined to bring inflation back to the 2% target.
Since the start of the war in Ukraine almost a year ago, the ECB has faced a general rise in prices, which led it to start raising interest rates last July.
While inflation peaked in June 2022 in the United States, price increases in the eurozone only peaked at 10.6% in October.
In January, inflation fell to 8.5% for the third consecutive month, more than economists expected, mainly due to the fall in energy prices.
But the improvement is relative, given that underlying inflation, excluding energy and food prices, remains at 5.2%, leading the Lagarde-led entity to believe it is still too early to moderate monetary adjustment.
The eurozone economy proved “more resilient” than expected to cope with the energy crisis and war in Ukraine, Lagarde said, following slight gross domestic product (GDP) growth of 0.1% in the fourth quarter of 2022 expected to escape a recession.
Following the announcement of the ECB’s decisions, the euro continued to fall against the dollar, trading at $1.0939.
Source: DN
