These decisions, widely expected, mark a turning point after years of cheap and abundant money policy.
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This had not happened since May 2011. Faced with record inflation, the European Central Bank (ECB) announced a rise in its key rates for the end of July. These decisions, widely expected, mark a turning point after years of cheap and abundant money politics. “Inflation is undesirable” and the ECB “gonna make sure she gets back on target“, promised Christine Lagarde, Thursday, June 9.
Euro guardians plan to “raise key rates by 25 basis points” at their next meeting on July 21, before “another rise in September”. will follow “a series” interest rate hikes “over the next few months depending on the medium-term inflation outlook”explained the President of the ECB, Christine Lagarde.
Since December, the ECB has been surprised by the dynamics of inflation, which has accelerated further with the war in Ukraine. It reached 8.1% over one year in May, with fourteen out of nineteen countries in the euro zone being above this average. Unheard of since the introduction of the single currency and a level four times higher than the ECB’s target set at 2%.
The ECB has significantly raised its inflation forecasts until 2024: it should rise to 6.8% in 2022, before slowing to 3.5% in 2023 and 2.1% in 2024. By raising their key rates , the goal of central banks is to bring inflation under control and compress demand.