FRANKFURT (Reuters) – The European Central Bank (ECB) is expected to raise interest rates for the first time in more than a decade on Thursday to curb runaway inflation.
Although rate hikes are necessary to combat inflation, which reached an all-time high (+8.6% over one year) in June, ECB officials are far from agreeing on the pace at which they must intervene.
According to sources familiar with the matter, a rate hike of 25 or 50 basis points is envisaged, whereas the ECB had indicated in June that it wanted to raise its rates by only a quarter of a point in July.
The recent fall of the euro below parity with the dollar, for the first time since December 2002, also reinforces inflationary pressures, which argues in favor of a larger hike in rates, even if this ends up hurting growth. .
Such an increase, however, would require the ECB to protect the most indebted countries, such as Italy or Spain, from soaring borrowing costs.
An agreement on a new bond buying program, already on the verge of being concluded according to some sources, would therefore be necessary.
ECB officials are also working on a deal to help so-called eurozone periphery countries in the bond markets if they abide by European Commission rules on reform and fiscal discipline.
The decisions taken by the ECB at the end of its monetary policy meeting should be announced Thursday at 12:15 GMT, and Christine Lagarde will speak at 12:45.
(Report Balazs Koranyi and Francesco Canepa; French version Camille Raynaud)