The ECB increases its rate by 0.75 point. A shock measure, almost unprecedented, and which will speed up the recession in the euro zone.
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Sauve which can be at the European Central Bank. The monetary institution increased its deposit rate by 0.75 points at once, at 0.75 %on Thursday, September 8. During its history, the ECB had only achieved such an increase in its very first meeting in 1999. At the time, it was essentially a technical decision, to set up the single currency. This time there is fire. Inflation in the euro zone amounted to 9.1 % in August (in annual sliding), while its objective is to keep it around 2 % in the long term.
“Inflation is far too high and will probably remain so for an extensive period,” said Christine Lagarde, his president. During the time that her press conference lasted, the Euro goalkeeper said and repeated her “determination” to bring inflation to 2 %. She therefore announces that the increase in this Thursday is only the beginning. “During our next meetings (which take place every six weeks), we plan to further increase interest rates.”
systematically
Ms. Lagarde has taken care to specify that the next increases will not necessarily be 0.75 points each time, and that the situation will be systematically reassessed, but the trend is clear: by the end of the Year, the BCE deposit rate, which was negative between June 2014 and July this year, will undoubtedly be close to 2 %. You have to go back to 2008 to find such a level.
This is the end of an era, as Ms. Lagarde reminds us. “My predecessors had spent their time fighting for deflation. This is why we had put negative interest rates. It has been years that we have not fought against inflation.” The president of the ECB recognizes in hollow that the current challenge involves the credibility of the institution it directs. “At the end, (this one) will be judged on our ability to bring inflation to its 2 %objective or not.”
For a year, the BCE Council of Governors seems constantly overwhelmed by the reality of the price increase. In December 2021, Ms. Lagarde still announced that a rates increase this year was “improbable”. In June, the same thing: ECB’s announcements proved to be deciduous in a few weeks. The monetary institution then made the unusual decision to pre-announce, one month in advance, an increase in its rate of 0.25 point for July. Finally a month later it was 0.5 point.
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