General inflation in the euro zone slowed down in January, with the inflation rate falling to 8.5 percent after 9.2 percent in December. However, the envisaged target mark is far below.
In the fight against high inflation, European Central Bank (ECB) Council member Klaas Knot brought up another significant interest rate hike of 0.50 percentage points in May. Should there not be a fundamental decline in inflation, another interest rate hike of the same size as in March could follow in May, the Dutch central bank governor said on Wednesday at an online event of the news agency MNI.
ECB representatives had previously made it clear that another rate hike of 0.50 percentage points was to be expected in March in the fight against high inflation. The central bank last raised the key interest rate in early February by 0.50 percentage points to 3.0 percent.
Knot justified the need for further significant interest rate hikes with the high core inflation in the euro zone. It is true that general inflation slowed down in January and the inflation rate fell to 8.5 percent after 9.2 percent in December. However, the annual rate of core inflation, which excludes volatile energy and food prices, remained at a record high of 5.2 percent in January.
The market is firmly expecting the ECB to raise interest rates by a further 0.50 percentage points to 3.50 percent in March. The next interest rate decision will not be made until May. With the interest rate hikes, the ECB wants to push the inflation rate back towards the target of two percent.
Source: Stern
