Jumbo rate hikes by the ECB, as in September and October, will not become the norm, according to French central bank boss François Villeroy de Galhau. “We are clearly approaching what I would call the normalization range, which is estimated to be around two percent,” France’s top monetary authority said at an event in Tokyo on Tuesday. “We should reach this level in December.”
In addition, the European Central Bank (ECB) is likely to raise interest rates further. But this can then be done more flexibly and at a slower pace. “Jumbo rate hikes will not become a new habit,” Villeroy said. The next ECB interest rate meeting is on December 15.
fight against high inflation
In this context, economists usually refer to the so-called neutral interest rate level, which does not push or slow down an economy. They currently see this in the deposit rate, which banks receive from the central bank for parking excess funds, in a range between 1.5 and 2.0 percent.
In September and October, in the fight against high inflation, the ECB raised key interest rates by an unusually high amount of 0.75 percentage point. The deposit rate is already at 1.5 percent – at the lower end of the neutral range estimated by economists.
Inflation is leveling off
Signs that US inflation may already have peaked are a positive sign, Villeroy said. Because the world’s largest economy is at the forefront of the current inflation cycle, he explained. High price pressures in the US eased noticeably in October.
Inflation fell from 8.2 percent in September to 7.7 percent. That was the fourth decline in a row and had fueled speculation that the US Federal Reserve could ease up on its rate hike in the future. “The tightening of monetary policy in the US has a strong impact on the rest of the world because of the high dollar exchange rate,” said Villeroy.
Source: Krone
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.
