Those responsible for monetary policy also included in the agenda the reduction of the bank’s balance sheet, of 9 trillion euros, which is another step towards the elimination of a decade of purchases of public debt.
“It also became clear that further interest rate hikes would be necessary to reach the ECB’s 2% (inflation) medium-term target,” according to the meeting minutes.
The ECB added that some of its officials even expressed the view that “monetary tightening will probably have to continue after the monetary policy stance has normalized and moved into largely neutral territory.”
The rise in interest rates of 75 basis points was supported by a large majority, although “some” officials wanted a lower rate of 50 basis points.
While the ECB has made a firm commitment to continue raising rates, markets are now expecting a more modest 50 basis point hike on December 15, as a number of policymakers suggested a slowdown was in order after two consecutive rate hikes. 75 basis points.
A possible compromise may be that a lower interest rate rise is accompanied by an early start in the reduction of the portfolio of bonds purchased under the ECB’s Asset Purchase Program, of 3.3 trillion euros, in a process known as quantitative tightening.
Even if the ECB slows, markets see rates doubling to 3% next year as inflation, now at 10.6%, will take years, possibly as late as 2025, to return to target of 2% of the ECB.
Source: Ambito
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