The president of the European Central Bank, Christine Lagarde, said Thursday that the interest rate hikes aimed at curbing excessive inflation could continue beyond what was almost registered by the institution in March. “At this point, it is possible that we continue on this path,” Christine Lagarde told the Spanish channel Antena 3.
However, it did not advance on the scope of possible increases after the meeting on March 16, the subject of all speculation by the markets. Christine Lagarde said it was “impossible to say” how much the monetary institute’s key rates should rise further. These decisions will be made “based on the data” available at future meetings, she added.
Inflation of 8.5% in February
The guardians of the euro have raised rates by 3 percentage points since July, an unprecedented turnaround amid inflation hovering around four times the medium-term target of 2%. Is this a sign that this monetary tightening is working? The annual inflation rate in the euro zone fell in February for the fourth consecutive month, to 8.5% year-on-year, after 8.6% in January, according to Eurostat on Thursday, but the fall is less pronounced than expected due to high food prices. .
Markets are betting that the ECB will raise its benchmark deposit rate to 4% from its current level of 2.5%. Christine Lagarde did not dare to enter into such a forecast but was determined that credit costs reach “levels that restrict economic activity” and remain there as long as inflation “is not guaranteed” to return to its target.
So far, the real economy has held up well to monetary policy tightening and recession fears are easing. In this context, “stopping the rise (in rates) beforehand, or even releasing it, would be a serious mistake,” warned Joachim Nagel, president of the Federal Bank of Germany, on Wednesday.
Source: BFM TV
