ECB, another bite in rates to reduce inflation. In March, a new walk

Yet another intervention against inflation by the European Central Bank. The Governing Council decided to increase the three ECB interest rates by 50 basis points. Thus, the interest rates on the main refinancing operations, the marginal lending facility and the permanent deposit facility will be increased to 3.00%, 3.25% and 2.50%, respectively, with effect from February 8, 2023.

The Governing Council “expects further increases” in interest rates and “in view of the underlying inflationary pressures, intends to increase interest rates by another 50 basis points at the next monetary policy meeting in March, to then assess the subsequent evolution of its policy monetary”. “Maintaining interest rates at restrictive levels – highlighted by Frankfurt – will reduce inflation over time by decelerating demand and will also protect against the risk of a persistent increase in inflation expectations. In any case, the decisions of the Council of the ECB on key rates will continue to be data-driven going forward and will reflect an approach whereby such decisions are made on a case-by-case basis at each meeting. The Governing Council “stands ready to adjust all its instruments within the framework of its mandate to ensure that inflation returns to the target of 2% in the medium term”.

So there is another interest rate hike on the horizon. And Christine Lagarde, number one at the ECB, also clarified bluntly. “No, no, no”, this is how the president responded at a press conference in Frankfurt to the hypothesis that the rise in interest rates could slow down from March onwards. “There is still a long way to go, we have not yet reached the peak”, underlined Lagarde, adding and concluding that the climb scheduled for March “is an intention, but not an irrevocable commitment”.

Source: IL Tempo