ECB accounts show overwhelming inflation worries By Reuters
Economy 7 minutes ago (Oct 06, 2022 12:52)
© Reuters. FILE PHOTO: Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. REUTERS/Wolfgang Rattay/File Photo
FRANKFURT (Reuters) – European Central Bank policymakers meeting last month worried that inflation could get stuck at exceptionally high levels so aggressive policy tightening was needed, even at the cost of weaker growth, the account of their Sept 7-8 meeting showed on Thursday.
The ECB raised rates by a bigger than expected 75 basis points at the meeting and signalled further hikes, fearing that rapid inflation was at risk of getting entrenched, making it even more difficult to break.
While some made the case for a smaller, 50 basis point rate hike, a “very large” number of policymakers backed a bigger increase, the accounts indicate.
“Inflation was far too high and likely to stay above the Governing Council’s target for an extended period,” the ECB said its account.
“The expected weakening in economic activity would not be sufficient to reduce inflation to a significant extent and would not in itself bring projected inflation back to target,” it added.
Since the Sept meeting, inflation accelerated to 10%, a level not seen in some euro zone countries for over 70 years, and policymakers have started to line up behind another 75 basis point increase in the 0.75% deposit rate, a move now largely priced in.
ECB President Christine Lagarde also said the bank would keep on raising rates at least until it hit the so called neutral level, where the bank was neither stimulating not holding back growth.
While there is no universally accepted estimate for the nominal neutral rate, economists and policymakers tend to put it between 1.5% and 2%, suggesting that the ECB could get there by the end of the year.
While inflation keeps rising, economic growth continues to slow and the bloc may already be in recession as a surge in energy costs is holding back consumption and discourages investment.
This in turn is bound to weigh on inflation further out but policymakers insist that even a recession would not be enough to control prices, so rate hikes must go on, no matter what.
The ECB will next meet on Oct 27.
ECB accounts show overwhelming inflation worries
By Terje Solsvik and Nerijus Adomaitis OSLO (Reuters) – The Norwegian government expects record income next year from its oil and gas industry, it said on Thursday, predicting a…
LONDON (Reuters) -The Bank of England will gauge the health of Britain’s government bond market before it unwinds the emergency intervention it launched after the governement’s…
By Francesco Canepa FRANKFURT (Reuters) – The world’s central bankers are caught up in a race to curb inflation that only the Federal Reserve can stop. The U.S. central bank has…
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.