As expected, the European Central Bank (ECB) continues to tighten the screws. The body chaired by Christine Lagarde has decided to raise the price of money another half a point.
After this increase, the interest rate for non-credit bank liquidity remains at 2.5% and that for short-term financing operations at 3%, the highest since November 2008. In other words, the money price is back near Great Recession levels. The bank says it will “maintain the course of raising interest rates significantly at a steady pace.”
The bank will also continue with its progressive reduction of asset purchases. “The decrease will amount to 15,000 million euros per month on average until the end of June 2023 and its subsequent rate will be determined over time,” reads the statement.
This very morning, the Bank of England has raised its official interest rate by 0.50 percentage points, to 4%, the highest level since 2008, to counteract inflation that remains above 10% in the United Kingdom.
There was a doubt as to whether the ECB would have eased the brakes a bit given the drop in inflation in the euro area, which has been falling for three months in a row. But the persistence of underlying inflation (which does not take into account the more volatile components such as energy), which has been locked in at 5.2%, has caused the balance to fall towards a more decisive rate hike.
Likewise, the relative strength of the economy of the euro zone (there is no state in recession and perhaps Europe manages to avoid it by growing 0.1% in the last quarter) and of the labor market (the unemployment rate is at a minimum, from a historical point of view, at just over 6%), the ECB (and its toughest wing, that of the hawks) does not tremble when it comes to cooling the economy and getting closer to the inflation target of 2%.
Doubts remain about the evolution in the coming months. “In view of underlying inflationary pressures, the Governing Council intends to raise interest rates by another 50 basis points at its next monetary policy meeting in March and will then assess the further path of its monetary policy.” , reads the statement.
But the pigeons, that is to say, the group of countries favorable to relaxing the restrictive turn of the price of money a little, are confident that if the trend continues, next spring it will be possible to opt for a softer increase, perhaps 0, 25%
