The European Central Bank (ECB) should start raising borrowing costs in July to prevent inflation expectations becoming de-anchored, Governing Council member Olli Rehn said.
“We are seeing signs of second-round effects,” Rehn said in an interview in Salzburg, Austria, where he attended the Global Europe seminar. “It’s important that we send a signal that these higher inflation expectations we are currently witnessing will not become entrenched.”
The Bank of Finland governor said it is “reasonable that we will rather sooner, in my view in July, start raising rates in line with our normalization of monetary policy, and would expect that when autumn comes, we would be at zero.”
Photo: Reuters
Faced with record inflation — driven partly by Russia’s invasion of Ukraine — ECB officials are increasingly coalescing around a July rate increase, with even historically more dovish Governing Council members such as Rehn backing such a move.
The prospect of the first hike in more than a decade is stoking concerns of a blowout in the bond yields of weaker eurozone economies.
The ECB’s staff are designing a backstop that would be available to use against debt-market stress caused by shocks outside the control of individual governments.
What “we would have in our toolbox in reserve” is “a kind of instrument that would help to counter possible unwarranted fragmentation of financial conditions in Europe,” Rehn said.
Still, he said that he would make “the case for outlining certain principles of an instrument without creating yet a legal instrument, because we don’t know the precise nature of the crisis.”
The war in Ukraine is hampering the region’s rebound from the COVID-19 pandemic. The ECB is due to publish new economic projections next month after already lowering its growth forecasts in March.
“We are seeing some stagflation tendencies,” Rehn said.
The Governing Council should ensure that monetary decisions do not derail economic growth, but also avoid inflation becoming entrenched, he added.
EXTRATERRITORIAL REACH: China extended its legal jurisdiction to ban some dual-use goods of Chinese origin from being sold to the US, even by third countries Beijing has set out to extend its domestic laws across international borders with a ban on selling some goods to the US that applies to companies both inside and outside China. The new export control rules are China’s first attempt to replicate the extraterritorial reach of US and European sanctions by covering Chinese products or goods with Chinese parts in them. In an announcement this week, China declared it is banning the sale of dual-use items to the US military and also the export to the US of materials such as gallium and germanium. Companies and people overseas would be subject to
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) founder Morris Chang (張忠謀) yesterday said that Intel Corp would find itself in the same predicament as it did four years ago if its board does not come up with a core business strategy. Chang made the remarks in response to reporters’ questions about the ailing US chipmaker, once an archrival of TSMC, during a news conference in Taipei for the launch of the second volume of his autobiography. Intel unexpectedly announced the immediate retirement of former chief executive officer Pat Gelsinger last week, ending his nearly four-year tenure and ending his attempts to revive the
WORLD DOMINATION: TSMC’s lead over second-placed Samsung has grown as the latter faces increased Chinese competition and the end of clients’ product life cycles Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) retained the No. 1 title in the global pure-play wafer foundry business in the third quarter of this year, seeing its market share growing to 64.9 percent to leave South Korea’s Samsung Electronics Co, the No. 2 supplier, further behind, Taipei-based TrendForce Corp (集邦科技) said in a report. TSMC posted US$23.53 billion in sales in the July-September period, up 13.0 percent from a quarter earlier, which boosted its market share to 64.9 percent, up from 62.3 percent in the second quarter, the report issued on Monday last week showed. TSMC benefited from the debut of flagship
TENSE TIMES: Formosa Plastics sees uncertainty surrounding the incoming Trump administration in the US, geopolitical tensions and China’s faltering economy Formosa Plastics Group (台塑集團), Taiwan’s largest industrial conglomerate, yesterday posted overall revenue of NT$118.61 billion (US$3.66 billion) for last month, marking a 7.2 percent rise from October, but a 2.5 percent fall from one year earlier. The group has mixed views about its business outlook for the current quarter and beyond, as uncertainty builds over the US power transition and geopolitical tensions. Formosa Plastics Corp (台灣塑膠), a vertically integrated supplier of plastic resins and petrochemicals, reported a monthly uptick of 15.3 percent in its revenue to NT$18.15 billion, as Typhoon Kong-rey postponed partial shipments slated for October and last month, it said. The
RSS