The European Central Bank (ECB) unanimously approved the rise in interest rates by 25 basis points at its July meeting, to reduce inflation in the euro zone, and considered that the September decision will depend on the data.
The minutes of the ECB meeting, published on Thursday, reveal that “all members supported the 25 basis point increase in the interest rate proposed by Philip Lane,” the ECB’s chief economist.
Even so, a member of the ECB’s Governing Council expressed his preference not to raise interest rates, since the risk of transmission to the real economy is greater than expected.
The deposit facility rate is currently set at 3.75%, the interest rate for main financing operations at 4.25% and the interest rate applicable to the marginal credit facility at 4.5 %.
The ECB has raised interest rates by 425 basis points since July last year, the fastest rate hike cycle in eurozone history.
According to the minutes, the Governing Council stressed at its meeting in late July that decisions on interest rates should be made based on economic data and at each meeting due to high uncertainty.
Members of the Board of Governors largely agreed that before the September meeting they should not suggest a further interest rate hike, or a pause in rate increases, or that the cap has already been reached.
Further tightening of monetary policy, that is, more increases in the price of money, should be discussed at each meeting, based on available economic data and taking into account risk management that balances relevant risks, the ECB considered.
Some members of the Governing Council were in favor of raising interest rates further in September to bring inflation down to the 2% target, especially if inflation does not fall as fast as expected.
“A new rise in interest rates would be necessary in September if there were no convincing evidence that the effect of the cumulative restriction was not strong enough to reduce core inflation,” the minutes read.
Some ECB members thought it might be difficult to bring inflation back to target once the effect on inflation of previous shocks to external supply has faded and domestic price pressures have begun to weigh more heavily.
Source: TSF
