On Thursday, the ECB raised its deposit rate from zero to 0.75%, the largest increase in history, and its president, Christine Lagardeadvocated another two or three hikes, stating that rates are still far from a level that would bring inflation back to 2%.
According to Reuters, five sources close to the process indicated that many monetary policy makers increasingly see more likely to push rate into “restrictive territory”referring to raising them to a rate level that causes the economy to slow down, to 2% or more.
The sources, who spoke on condition of anonymity because policy discussions are private, said this is most likely to happen if the ECB’s first inflation projection for 2025which will be published in December, still above 2%.
The ECB currently expects inflation of 2.3% in 2024, although one source said an internal forecast presented at Thursday’s meeting put it closer to 2% after taking into account the latest gas prices.
The governor of the Dutch central bank, Klaas Knotand the Belgian Pierre Wünsch they were the first to openly talk about entering restrictive territory late last month, at a time when most of their colleagues believed that rates should only go back to between 1% and 2%.
Sources indicated that monetary authorities were bracing for a recession this winter and weaker economic growth next year than the official ECB projection of 0.9%.
climb it in the international energy pricesadded to Russia’s announcements to cut off all supplies if the G7 insists on caps on Russian oil prices add pressure and threaten activity levels.
However, some were comforted by the labor market strengthwhich should cushion the impact of higher rates, they added.
For his part, the US Federal Reserve Chairman Jerome Powell, announced that they do not rule out re-applying higher rate hikes, given the persistence of inflation. The decision of the monetary entities pushed the dollar close your first weekly drop in a month against six other currencies.
Source: Ambito
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