European inflation is above 9%, leading the agency to make an unprecedented decision in 20 years’ time
Inflationary pressures, which exceeded 9% at European level, have prompted the European Central Bank (ECB) to take an unprecedented measure. The body chaired by Christine Lagarde announced a 0.75% rate hike on Thursday, the largest increase in its 20-year history. He also points out that more hikes will be needed to contain prices, which will remain high “for a long time”.
After announcing the end of the emergency buying due to the pandemic, the ECB announced that it would end the era of negative interest rates and that they would gradually rise. However, during the last meeting of its board of directors, the European bank decided to make the price of the euro 0.5% more expensive and is now betting on a more aggressive rise.
The agency already warned before the summer that it would evaluate the evolution of the European economy and that, based on this data, it would propose a new increase. Inflationary pressures, fueled by the threat of gas cuts in Russia, and the depreciation of the euro against the dollar have shaped the ECB’s decision.
The European entity is thus following the path taken by other central banks and achieving an acceleration that it hopes will limit the price rise. Until now, the organization’s biggest fear has been that a rate hike would increase the debt of peripheral countries. To avoid this, it has the Debt Transfer Mechanism -TPI, for its acronym in English- which could be released with the application of this increase.
The ECB’s objective is to ensure that inflation returns to 2% in the medium term and will regularly “review” its measures to that end, according to the statement released on Thursday. Currently, the entity has revised its projections upwards, calculating that inflation will remain above 8% in 2022, before falling to 5.5% next year and 2.3% in 2024.
High energy prices and the war in Ukraine are lowering consumer confidence, which will slow economic activity in the EU. Due to the reopening after the pandemic, the ECB predicts a growth of the European economy of 3.1% this year. For 2023 and 2024, it calculates that activity will decline to 0.9% in 2023 and 1.9% in 2024.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
