Needless to walk a lot, inflation still bites, at least in the head of Christine Lagarde. And that is why the ECB has no intention of interrupting the period of high interest rates, which began last July, so soon. The markets were already depressed and were not surprised by the words of the president of Eurotower. “Ascents are possible even after March.” Appointment confirmed by the minutes of the board of the beginning of February. In short, the pigeons who wanted an easing of monetary policy, with a consequent boost in mortgages and loans, will have to wait. And if there is a hawk, it is ECB chief economist Philip Lane, who proposed raising the ECB’s three main interest rates by 50 points in March and announced that the Governing Council plans to raise them further. The Frankfurt council should therefore stay the course, raising interest rates significantly at a steady pace and keeping them at levels restrictive enough to ensure a timely return of inflation to the medium-term target of 2%. And to think that the Central Bank still aims for a “soft landing for the economy”, according to the minutes of the last Council meeting. Despite the prolonged monetary tightening, “the economy has proven to be more resilient than expected and should recover in the coming quarters. The unemployment rate remained at a record low of 6.6% in December 2022. However, the pace of job creation was considered to be in potential deceleration, with rising unemployment in the coming quarters”, reveal the papers. “In particular, showing determination now to raise rates significantly can help avoid being forced into new highs later.”
So much so that the eurozone “must avoid recession, even if it is too early to claim victory”. In practice, Frankfurt tries to set the bar high enough to prevent further cost increases, even though the price of raw materials, especially gas and oil, has returned to pre-war levels in Ukraine in recent months. But the ECB is not confident «Part of the fall in prices seems to be due to the mild winter climate, which will not necessarily be repeated next winter. It was highlighted that the eurozone continues to face an exceptionally high degree of global uncertainty, due to economic and geopolitical factors”, underline the minutes. There are no guts for cats.
Source: IL Tempo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
