“Inflation continues to fall, but is still expected to remain too high for too long. The Governing Council is committed to ensuring that inflation returns to the medium-term target of 2% in a timely manner. To strengthen progress towards achieving its goal, the Governing Council decided today to raise three key interest rates by 25 basis points,” he said this Thursday after a meeting of 26 decision-makers.
The interest rate on deposits will increase from September 20 to 4% – a new maximum in history – to basic refinancing operations increases to 4.5% and liquidity provision 4.75%.
The cycle, which began in July 2022, therefore includes ten consecutive hikes totaling 450 basis points to curb eurozone inflation, which topped 10% last October. However, it is still at 5.3%, well above the 2% target.
If until July Lagarde made it clear what she hoped to do at the next meetings, then at the last meeting before the summer holidays, the president of the monetary department assured that everything would depend on the development of economic data. And this is now the rationale for this decision.
“The decision to raise interest rates today reflects the Board of Governors’ assessment of the inflation outlook in light of available economic and financial data, underlying inflation dynamics, and the strength of monetary policy transmission,” the department said in a statement. Inflation forecasts have been revised upwards and downwards for economic growth.
Despite this, the central bank led by Christine Lagarde is signaling that it may pause on its path to raising interest rates. “The Governing Council believes that key interest rates have reached a level that – if maintained for a sufficiently long period – will make a significant contribution to a timely return of inflation to target.”
Future decisions will “ensure” that key interest rates will remain at sufficiently restrictive levels “for as long as necessary,” he further guarantees.
Author: Business magazine
Source: CM Jornal
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