European Central Bank (ECB) President Christine Lagarde on Wednesday reiterated that the institution plans to raise its interest rates by a half percentage point even as the eurozone’s economic outlook improves.
Data released on Monday showed the 20-nation currency bloc dodged a recession at the end of last year by posting weak, but positive growth of 0.1 percent, while inflation has been easing — even if it remained high at 8.5 percent last month.
“In view of the underlying —inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March,” Lagarde told the European Parliament.
Photo: AFP
She added that it would then evaluate the subsequent path for monetary policy, reiterating the message the bank delivered after hiking rates by a half percentage point on Feb. 2.
NO END IN SIGHT
Several ECB officials have said that the planned half-point rate increase is unlikely to be the last in what is already the most aggressive monetary-tightening cycle in the institution’s history.
The ECB is to publish updated economic forecasts at next month’s meeting, which would help it formulate the course for monetary policy.
If the central bank goes through with the half-point rate hike, it would be its sixth increase since July last year for a total increase of 3.5 percentage points.
CRITICAL POINT
The rates are approaching the point where analysts consider them restrictive, or high enough where they slow consumption and investment, which in turn reduces pressure on prices.
“Keeping interest rates at restrictive levels will, over time, reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift in inflation expectations,” Lagarde said.
Policy rate decisions would be data-dependent and follow a meeting-by-meeting approach after next month, she added.
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