Assessment by the head of the central bank
ECB could plan higher interest rates after March
02/08/2023, 5:15 p.m
On Thursday, the ECB raised interest rates again by 0.50 points. However, core inflation in January remained at the level of the previous month. The governor of the Dutch central bank concludes that several rate hikes will follow in the coming months.
According to Klaas Knot, the head of the Dutch central bank, the European Central Bank (ECB) will probably not move away from its rate hike course after March in the fight against inflation. The interest rate path thereafter is more uncertain, the knot said in a webcast by MNI Market News, according to the speech.
But he thinks it is “highly unlikely that the March hike will be our end point.” There is still a way to go. “And unless underlying inflationary pressures ease significantly, maintaining the current rate of increases into May may well be justified.”
The ECB reversed interest rates in July in the face of skyrocketing inflation. On Thursday, as in December, it raised interest rates by 0.50 points and at the same time announced a further increase of half a point in March. How things will continue after that is unclear.
Price surge is gradually weakening
Inflation in the euro area fell from 9.2 to 8.5 percent in January thanks to a slowing surge in energy prices. Meanwhile, core inflation, which excludes fluctuating prices for energy, food, alcohol and tobacco, remained stable in January at the December level of 5.2 percent.
This is worrying many monetary authorities. The more the cumulative consequences of the tightening are felt, the more important it becomes to fine-tune the steps, Knot said. “Therefore, once we see a clear and decisive turn in the dynamics of core inflation, I expect that we will move to smaller steps.”