The European Central Bank (ECB) could decide this Thursday to slow down the rate of interest rate rises, after two consecutive increases of 75 percentage points.
Since July, the ECB has followed an unprecedented monetary tightening line, raising its rates by two percentage points in total, to try to contain the rise in prices, driven by energy costs, which skyrocketed after the outbreak of the war in Ukraine.
Today’s meeting of the Governing Council is expected to mark the end of the “first phase of normalization” of monetary policy after several years of exceptionally low rates, according to Bank of France Governor François Villeroy de Galhau.
The French representative defends a rise in interest rates of 50 basis points, after two rises of 75 points in September and October, which showed the ECB’s determination to control inflation.
Inflation in the euro area eased slightly in November to 10% from 10.6% the previous month, thanks to the moderation in energy prices.
In a scenario of a 50 basis point increase in interest rates, which most economists consider likely today, the benchmark deposit facility rate would rise to 2%.
However, some “hawks” of the Governing Council do not hide that they are in favor of a new rise of 75 basis points.
The German Isabel Schnabel, a member of the ECB’s executive committee, considers the “margin to slow down the pace of monetary tightening” as “limited”.
With inflation still far from the ECB’s 2% medium-term target, interest rate hikes should continue, even at the risk of further stalling the economy, which is close to recession.
According to analysts, the slowdown in activity alone will not be enough to lower prices.
To make a decision, the members of the Governing Council have available new economic forecasts until 2025.
Source: TSF
