The European Central Bank (ECB) meets this Thursday to decide whether to raise interest rates amid warnings of the uncertainty of monetary tightening due to banking turmoil.
The institution, chaired by Christine Lagarde, recently indicated that a further 50 basis point hike in interest rates was likely, but the failure of the Silicon Valley Bank (SVB) in the United States and its effects on other banking institutions created additional problems. ECB to raise interest rates to curb inflation.
The institution may “raise less” rates after a hike expected this Thursday, said Baader Bank analyst Robert Halver, quoted by AFP on Tuesday.
It’s about “relieving pressure” when “the economy is very heavily over-indebted” and high rates could further weaken banks, the same analyst explained.
On Monday, with markets jittery over financial turmoil, after the collapse of the SVB and difficulties in a number of other North American banking structures, European leaders tried to calm the mood, saying there was no risk of contagion. and that “the banking system is sound,” echoing a statement made by U.S. President Joe Biden in an early morning White House statement.
When this financial instability emanating from the United States was far from occurring, ECB President Christine Lagarde announced back in February that a further 50 basis point interest rate hike would almost certainly be secured at the March meeting.
Lagarde has reiterated this intention in several public appearances at a time when euro zone inflation continues to run at levels well above the ECB’s 2% medium-term target.
After rising prices following the Russian offensive into Ukraine, the ECB launched an unprecedented cycle of raising interest rates last July, ending a decade of cheap money.
But the consensus reached so far in the Board of Governors on monetary tightening should give way to a “very lively debate” at this Thursday’s meeting about what will follow, according to Carsten Brzeska, an ING economist.
Supporters of a looser policy on the part of the monetary institution may argue for a more cautious approach going forward against the continuation of the more aggressive rise in the value of money advocated by the so-called hawks.
Lagarde said she would do “whatever it takes” to restore price stability.
Eurozone inflation eased in February for the fourth straight month to rise to 8.5% from 8.6% in January, according to Eurostat, but core inflation, which excludes energy and food, is considered more representative. long-term trends, hit a record high of 5.6% in February.
This Thursday, the ECB is releasing new growth and inflation forecasts that help reassess the situation and determine the future direction.
Author: Portuguese
Source: CM Jornal
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