This major decision should make it possible to fight against inflation. It was “unanimous”, according to Christine Lagarde, President of the ECB.
After an initial increase of 0.50 point in July, the Governing Council of the European Central Bank (ECB) announced on Thursday a new unprecedented increase in its key rates, of the order of 0.75 point. “This important measure anticipates the transition from the currently very accommodative level of key rates to levels that will ensure that inflation returns to the ECB’s medium-term target of 2% as soon as possible.“, justifies the international organization, which underlines that the latter remains “much too high“.
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This decision was taken unanimously by the Board of Governors, signaling the institution’s determination to fight inflation. “We had different points of view around the table, an in-depth discussion, but the result of our discussions was a unanimous decisionsaid Christine Lagarde, President of the ECB, at the conference following the monetary policy meeting. “For those who keep saying that the ECB is lagging behind, I argue that we are on a path that started in December“, she added.
But the ECB hasmakes forecast errors“, recognized Thursday its president, while the institution was taken by speed by the records of inflation recorded in the euro zone. “We have made mistakes in forecasting, as have all international institutions and as have most economists, because it is virtually impossible to anticipate and include new models such as Covid, war in Ukraine, energy blackmail“, said Christine Lagarde, saying in”take responsibility“.
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European Central Bank rates are still “far“of a level that”will help bring inflation down to 2%“despite a historic increase of 75 basis points decided on Thursday, explained the president of the institution, Christine Lagarde.
As a result, the following increases, which “will depend on the data“economic”must be of a magnitude that brings us closer fasterof this objective, she added after a meeting of the Board of Governors, assuring that “we will continue to raise rates“. “The Governing Council plans to continue raising interest rates in its upcoming meetings“, effectively specified the ECB in a press release. The institution now expects inflation of 8.1% in 2022, compared to 6.8% in June. For 2023 and 2024, euro keepers predict 5.5% and 2.3% respectively, still above the 2% target.
At the same time, the Board of Governors noted the “substantial slowdownof growth in the euro zone, hit hard by inflation and the consequences of the war in Ukraine. Activity should stagnate between now and the end of the year and the beginning of 2023, adds the ECB press release: growth forecasts are therefore revised downwards, reaching “3.1% in 2022, 0.9% in 2023 and 1.9% in 2024“. The organization justifies its decision by:very high energy prices» as well as by «supply bottlenecks“.