Save who can at the European Central Bank (ECB)! The monetary institution increased, Thursday, September 8, its deposit rate by 0.75 point at once, to 0.75%. During its history, the ECB had only achieved such a rise during its very first meeting, in 1999. At the time, it was essentially a technical decision, to set up the single currency. This time there is fire. Inflation in the eurozone stood at 9.1% in August (year-on-year), while its objective is to keep it around 2% over the long term.
“Inflation is far too high and will likely to remain so for an extended period”, underlines Christine Lagarde, its president. During the hour that her press conference lasted, the guardian of the euro said and repeated her ” determination “ bring inflation down to 2%. It therefore announces that this Thursday’s increase is only the beginning. “At our next meetings (which take place every six weeks), we plan to raise interest rates further. »
Systematically
Mme Lagarde specified that the next increases will not necessarily be 0.75 points each time, and that the situation will be reassessed systematically, but the trend is clear: by the end of the year, the deposit rate of the ECB, which was negative between June 2014 and July this year, will probably be close to 2%. You have to go back to 2008 to find such a level.
It is the end of an era, as Mr.me Lagarde. “My predecessors had spent their time fighting against deflation. That is why we had set negative interest rates. It has been years since we fought inflation. » The President of the ECB acknowledges that the current challenge involves the credibility of the institution she leads. « In the end, [celle-ci] will be judged on our ability to bring inflation back to its 2% target or not. »
For the past year, the Governing Council of the ECB has seemed constantly overwhelmed by the reality of rising prices. In December 2021, Mme Lagarde was still announcing that a rate hike this year was « improbable ». In June, same thing: the announcements of the ECB turned out to be obsolete in a few weeks. The monetary institution then took the unusual decision to announce, a month in advance, a 0.25 point increase in its rate for July. Finally a month later it was 0,5 point.
“The ECB is giving a negative signal to companies, pushing them to cut investment and hiring” Nicolas Goetzmann, head of macroeconomic strategy at La Financière de la Cité.
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