(Finance) – Thursday 2 February the European Central Bank (ECB) raised the three key interest rates by 50 basis pointsbringing the main refinancing rate to 3.50%, with the Governing Council committing to “stay on course in raising interest rates significantly at a steady pace and in keeping them at levels restrictive enough to ensure a timely return of inflation to the medium-term objective of 2%. lack of guidance beyond next month however, it was interpreted by the market as an implicit indication of a slowdown in the restrictive cycle.
As Pictet Wealth Management economists have pointed out, “a number of new elements helped give it a dovish hintAmong these are the fact that the ECB did not commit to defining a specific path for rates beyond March, the ECB corrected its risk assessment – noting that both growth and inflation risks have now become “more balanced” – and the ECB has recognized the effective transmission of monetary policy through the credit channel.
Furthermore, the rationale behind a “data-driven” and “meeting-for-meeting” approach combined with a pre-commitment to hike by 50 basis points in March it is not understandable for everyone, ING economists pointed out. Just trying to look through the haze of most of the press conference, what’s left are remarks like “a disinflationary process isn’t already underway” and “we know we have ground to walk“, they stressed.
Several statements arrived on Friday, however, suggested that the rate increases will also be implemented in the meetings following the one in March. “I don’t think the hike in March will be the last. We will decide later how many more are needed,” Slovak central bank governor Peter Kazimir said. right direction,” he added.
According to Gediminas Simkus, governor of the central bank of Lithuania, the inflation path in the eurozone is starting to improve, so the end of the ECB rate hikes could be near. Simkus stated that May’s increase could be 25 or 50 basis points, but an increase to 75 basis points is unlikely. “I see positive trends for inflation – he said underlined – I think we are already moving towards that terminal tariff”.
“I don’t think we can go from a 50 basis point hike in March to zero“, said Pierre Wunsch, governor of the Belgian central bank instead. “It could be a 50 or 25 basis point hike: I certainly wouldn’t rule out another 50 basis point hike, but it will depend on the data,” he added. According to Wunsch, the market therefore misinterpreted yesterday’s move, “a hawkish decision”.
(Photo: Mika Baumeister on Unsplash)