To curb the huge rise in inflation in Europe last year, the European Central Bank recently raised its key interest rate very drastically – making variable loans, for example, significantly more expensive. Now even more big price jumps are likely. However, criticism of this comes from Italy: the head of the central bank, Ignazio Visco, contradicts his colleagues from Austria and Germany.
The uncertainty is so great that the Governing Council, which decides on interest rates, has agreed to take decisions from meeting to meeting without giving any guidance for the future, Visco said in Rome on Wednesday. “For this reason, I do not value comments from my colleagues about future and pending interest rate hikes.”
A few days ago, ECB President Christine Lagarde confirmed the central bank’s intention to raise interest rates by another 0.50 percentage point at its March 16 meeting. What comes next is still unclear. However, some currency watchdogs have already issued signals.
Another series of rate hikes is imminent
In a newspaper interview on Tuesday, Austria’s central bank, Robert Holzmann, said he expects a slew of rate hikes this year given continued high inflation. Joachim Nagel, president of the Deutsche Bundesbank, said last week that further significant rate hikes beyond March could be necessary.
There are also votes from the ECB’s Executive Board on what to do after March. ECB chief economist Philip Lane said in a speech on Tuesday that current data indicate it would then be appropriate to raise key rates further.
Increases too fast?
According to Visco, the European Central Bank (ECB) should take immediate action in the fight against high inflation. While monetary authorities have succeeded in stabilizing inflation expectations, geopolitical uncertainties make developments difficult to predict. “Monetary policy must therefore remain prudent and based on the data that becomes available,” added the governor of Banca d’Italia Visco.
Since the interest rate turnaround in July 2022, the Eurocentral Bank has raised its policy rate five times in quick succession by a total of 3.0 percentage points. The interest on deposits, which determines the financial markets and which banks receive from the central bank for parking excess funds, is currently 2.50 percent. Experts currently believe that the ECB, on its tightening course, will peak interest rates at around 4% by the end of the summer.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
