As the US Federal Reserve and the Bank of England tighten monetary policy in the face of rapid inflation, more and more representatives of the European Central Bank are urging the institution to begin the process as well. Raising rates at a meeting in July or earlier …
At a meeting of the ECB on Thursday, July 21, the head of the Central Bank of Finland Olli Rehn said he supported the first rate hike. Mr Rehn estimated that at the July meeting, the ECB should raise the deposit rate, which is currently set at -0.5%, by a quarter of a point.
In an interview with the Finnish daily Helsingin Sanomat, Olli Rehn, a member of the ECB’s Board of Governors, said: “I think it would be wise to raise the deposit rate by 0.25 percentage points in July and autumn. to reduce it to zero. After that, we could continue to further normalize monetary policy gradually and proactively, “he said.
On Tuesday, an influential member of the ECB’s board, German economist Isabel Schnabel, said in an interview with the German newspaper Handelsblatt that “given the current conditions, raising rates in July is possible.” On April 21 last year, the chairman of the National Bank of Belgium, Pierre Vunsch, considered it “obvious” to raise the deposit rate to zero or even a slightly positive level by the end of the year. He said he was in favor of the first round of screws in July. Germany’s Joachim Nagel, Spain’s Luis de Gwindos and Latvia’s Martins Kazaks have also considered raising rates on the July 21 meeting in recent weeks.
“Hawk” Robert Holzmann would like to perform in June
For his part, Robert Holzmann, chairman of Austria’s central bank, was even more hawkish on Thursday, considering raising rates in June. Asked about this possible increase in the event in Salzburg, he said: “We plan to do it (…) We will discuss it at our meeting in June, and probably will.” Mr Holzmann, the most “hawk” of the ECB’s Governing Council, has repeatedly called for the normalization of the ECB’s monetary policy.
As for ECB President Christine Lagarde, she said on April 21 that important issues would be discussed at the June 9 meeting, and hinted that after the purchase of assets is completed, “probably in July”, the first increase in European rates may be “some”. time later. “
Inflation in the euro area reached 7.4% year on year in March, the highest since the single currency, prompting several ECB officials to call for an early end to the central bank’s bond-buying program, a prelude to the rate hike.
The Fed and the Bank of England are maneuvering in the face of rapid prices
On Wednesday, the US Federal Reserve raised the key interest rate by half a point (50 basis points) from 0.75% to 1% and added that further gestures of monetary policy will be “appropriate” in the coming months to fight inflation, which in March in the US reached 8.5%. The Fed has also developed a detailed schedule for the balance sheet reduction, which will begin gradually from June 1.
On Thursday, the Bank of England (BoE) also extended the bullish cycle, raising interest rates by a quarter of a point, raising it to 1%, the highest level since 2009. The Bank of England estimates that inflation could reach 10% this year in the UK, and now expects a recession in 2023 (-0.25% for GDP), against a growth of 1.25% previously forecast.
“Global inflationary pressures have risen sharply since Russia’s invasion of Ukraine. This has led to a significant deterioration in global and British growth prospects,” the central bank said.