European Central Bank President Christine Lagarde said Thursday that the Governing Council’s decision to raise interest rates by 25 basis points was taken by “very strong consensus.”
Lagarde explained at a press conference that at today’s meeting some directors considered it appropriate to raise interest rates by 50 basis points, another 25 points and that there was no one against an increase.
Lagarde reiterated that the central bank still has “some way to go” and is not taking a breather, so it will probably continue to raise interest rates in the coming months, but did not say how far this increase will go.
“We’ll know what the sufficiently restrictive interest rate is when we get there,” the ECB president said.
Lagarde felt that the pressures on wages had become stronger.
“Wage pressures have intensified as workers, in a context of a robust labor market, recover some of the purchasing power they had lost as a result of high inflation,” Lagarde said.
The ECB decided to raise the three interest rates by 25 basis points, a slowdown compared to previous increases, at a time when core inflation is slowing slightly and economic growth in the euro zone is quite timid.
The interest rate on main financing operations rose to 3.75%, the deposit facility rate rose to 3.25% and the interest rate applicable to the marginal credit facility rose to 4%, the highest level since October 2008.
“Inflation remains too high for too long,” the institution justified in a statement.
This was the seventh increase in 10 months, but the most moderate so far, since the previous increases were 50 and 75 basis points.
“The decisions of the Governing Council on reference rates will continue to be based on the assessment of the inflation outlook, in the light of the economic and financial data that become available, the dynamics of underlying inflation and the strength of the transmission of monetary policy,” the ECB said.
According to the statement, in parallel, the Governing Council will continue to reduce the portfolio of the asset purchase program (asset purchase program — APP) “at a measured and predictable rate.”
“In line with these principles, the Governing Council expects to discontinue reinvestments under the APP as of July 2023,” the ECB said.
In relation to the asset purchase program due to the pandemic emergency (pandemic emergency purchase program — PEPP), “the Governing Council intends to reinvest the principal payments of the matured securities acquired under the program until at least the end of 2024,” according to the text released at the end of the meeting.
Source: TSF
