2023-06-19 16:29:45
The European Central Bank (ECB) will still have to raise its rates, even if it means “sinning by excess” in its relentless fight against inflation, an official of the institution advocated on Monday.
Even if the period is full of uncertainties related to the impact of the Russian war in Ukraine as to the developments of the economy post-pandemic of Covid-19, one should not fear to ‘err in excess of doing too much rather than too little’ to set the level of rates that will bring inflation down sustainably, Isabel Schnabel said Monday in Luxembourg at a European conference.
The euro’s guardian institution continued its fight against inflation last Thursday, with an eighth hike in less than a year, by a quarter of a percentage point, to take its benchmark rate on deposits to 3 .5%.
But this cycle is not over and we will have to “continue to raise interest rates”, warned Ms. Schnabel.
Higher credit prices will have to continue as long as there is a lack of ‘convincing evidence’ that inflation – excluding energy and commodity prices – is on track to return to the medium-term target of 2%, has she added.
The latest ECB projections published on Thursday expect inflation to be 5.4% this year then falling to 2.2% (and 2.3% excluding energy) in 2025.
On Thursday, ECB President Christine Lagarde said it was “very likely” that a further rate hike would be decided at her next meeting of the institution in July.
This scenario should be respected ‘unless there is a significant change in the (inflation) outlook by July’, confirmed for his part Philip Lane, chief economist of the ECB, at a conference on Monday. to Madrid.
‘We have already made a lot of hikes’ so far, he noted, however, adopting a more cautious posture than Ms Schnabel on the continuation of the movement.
It is, according to him, far too early to predict a further rate hike at the back-to-school meeting in September. Some central bankers, including the President of the Federal Bank of Germany, have already called for the tightening to continue.
“September will be decided in September” in view of new economic projections and current data, simply concluded Mr. Lane.
/ATS
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