In line with analysts’ expectations, the European Central Bank decided to raise interest rates by half a percentage point, for the first time since 2011. He explained in a statement that it would be appropriate to continue raising interest rates. Benefit in future meetings.
And the European Bank started walking with its peers from central banks in raising interest rates, as it tries to put a lid on inflation The record, which is fueled by high energy prices, in addition to the supply crisis, especially with regard to gas, with the continuing crises sparked by the Russian war in Ukraine.
A few days ago, the European Central Bank revealed that it will raise interest rates at its meeting, Thursday, for the first time in 4,032 days, but the only question is the size of the increase, which could reach half a percentage point.
Strategists believe the central bank is likely to stick to a smaller quarter-point increase, and bet it will be reluctant to go back on earlier guidance it gave markets, but they also worry that a smaller rate hike might be a mistake. European Union countries rose to a level of 9.6 percent last June, while it reached 8.6 percent in 19 countries that use the euro.
More stringent conditions
“The upside risk has grown by half a point materially, and it’s almost become a toss in. It’s a reasonable outcome of the meeting, but it ran counter to recent contacts,” said James Rossiter, head of global macro strategy at TD Securities.
At the moment, the challenge facing the European Central Bank is not only in the rate of inflation, but also because the central bank is following its peers. Interest rates remain in negative territory, which observers say is making the price hike worse.
But the European Central Bank is grappling with a more stringent set of conditions than other central banks. High energy prices in Europe, exacerbated by the Russian war, are the biggest contributor to rampant inflation. However, what happens on that front is completely outside the control of the European Central Bank.
At the same time, Russia’s “Gazprom” has resumed gas shipments along the important “Nord Stream 1” pipeline, easing fears that it will not return to work after a period of scheduled maintenance, but concern remains that Russia may shut down gas sometime in the future in response to sanctions. Natural gas prices in Europe are stabilizing and remain near their highest level since March.
Russian gas pumping resumes
Today, it was announced the resumption of gas deliveries through the Nord Stream 1 pipeline after maintenance, quelling fears of an extension of the maintenance period. The operator of the pipeline, which bears the same name, confirmed that the Russian “Gazprom” had pumped gas back to Germany after the 10-day maintenance work was completed.
The company added that the flow of Russian gas through the line linking Russia and Germany will be 40%, which is the same capacity that the pipeline was operating in before the start of maintenance work.
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Late on Tuesday, Russian President Vladimir Putin revealed that exports through the Nord Stream gas pipeline will resume in low quantities, and on conditions, while requests for gas shipments now indicate that flows will return to 40 percent of the previous total capacity, which is a higher percentage. A little more than previously expected, according to Bloomberg.
Moscow has been restricting gas shipments to Europe for months, but the continent still depends on what little it gets to fill the retired salt caves, underground water reservoirs and fuel depots that hold its fuel stocks.
Recession risks are rising
In Italy, which is the third largest economy in Europe, a political crisis erupted that shook the stock and bond markets in the country. Italian Prime Minister Mario Draghi submitted his resignation to the president on Thursday, after losing the support of several major parties in his ruling coalition.
The European Central Bank is expected to unveil a new tool aimed at calming bond markets in the most vulnerable countries in the Eurozone such as Italy. However, she will need to choose her words carefully, as she wants to be seen as far removed from the political fray.
In terms of looking ahead, the risks of a recession in Europe are rising sharply. This could limit the central bank’s ability to continue raising interest rates, helping to combat high inflation, but also slowing down the economy and plummeting growth rates. The central bank may not have much room to operate before it has to change course.