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The European Central Bank announced another rise in interest rates in its quest to curb inflation, a day after the US Federal Reserve announced a pause in its restrictive campaign.
The European Central Bank, ECB, applied a quarter point increase, leaving interest rates between 3.5% and 4.25%. The eighth consecutive rise since July 2022 for the 20 countries that use the euro seeks to reduce credit to the economy.
The issuer seeks to return inflation to its target of 2% from the current 6.1% annual. Christine Lagarde, the president of the ECB, announced that there will be more increases, including at the bank’s next meeting on July 27.
“Are we done? Have we finished the journey? No, we haven’t reached our destination. Do we still have a ways to go? Yes, we have ground to cover,” said the official.
According to Lagarde, the ECB “will continue to rise at our next meeting. So we are not thinking of taking a break, as you can see.” Around the world, central banks seek to raise the cost of money to appease inflation, but some are already pausing their decisions to avoid collapsing their economies, a task with surgical subtlety in the midst of an unprecedented price increase caused by the consequences of the war in Ukraine and the lag of the Covid-19.
The United States Federal Reserve paused raising interest rates after 15 months of increases and now seeks to analyze economic growth and employment. Rate hikes take months to have an effect on the economy, experts say, and a pause could provide a clearer map for policymakers.
The European economy contracted slightly at the end of last year and the beginning of 2023, affected by the impact of the loss of Russian gas and the increase in prices.
According to the European Union statistics agency, Eurostat, economic output in the 20 countries that use the euro currency fell by 0.1% both in the last three months of 2022 and in the first three months of this year compared to the previous quarters.
Two consecutive quarters of decline is considered that the economy has entered a “technical” recession, according to experts.
with PA
