The European Central Bank increases its rates by 0.5 point, to 2.5 % for the deposit rate. “Inflation remains far too high”, she warns.
by Eric Albert (Frankfurt, Special Envoy)
Europe has not finished with interest rate increases. Thursday, February 2, the European Central Bank noted its levels of half a point, at 2.5 % for the deposit rate. This is the fifth increase in a row since July 2022, bringing the three -point total tightening. It is – by far – the fastest monetary hardening since the creation of the ECB twenty -five years ago.
and the monetary institution, which oversees the twenty countries of the euro zone, does not intend to stop there, as it indicates from the first sentence of its press release. “The Council of Governors will continue to significantly increase interest rates at a regular rate.” It is even more precise, committing now to further increase its rates by an additional half point at its next meeting March 16. Such a preemption of the next decision is a relatively unusual practice. And after ? “We will still have a long way to go, he will remain to move forward,” explains Christine Lagarde, his president. Clearly, interest rates will continue to increase, even if the pace will depend on the state of the economic situation.
No question of any “pivot” or slowdown for the ECB. Inflation is certainly decelerating – it was 8.5 % in the euro zone in January, after having reached a 10.1 % peak in November 2022 – but “it remains far too high”, continues M Me Lagarde. It therefore assumes entirely: interest rates will have to reach a “restrictive level” and stay there long enough to bring inflation to its 2 %objective.
reduction in energy prices
What to worry those who fear that the ECB causes a violent halt to the economy, while it shows signs of weakness: growth in the fourth quarter was 0.1 % in the euro zone , certainly avoiding recession, but narrowly. “The ECB is trying to control inflation by slowing the economy, annoys Jordi Schröder Bosch, of the positive association Money Europe. Let’s be clear: this decision means a reduction in wages, an increase in unemployment and a threat to investments in the green transition. “
The president of the ECB replies that the European economy resists rather well so far. “In Europe, we like to beat your coulpe, (…) But growth has remained positive in the fourth quarter. We should celebrate the fact that we are not in negative territory.” The economy is indeed more resistant than Predated the economists two or three months ago, largely thanks to the good surprise of the drop in energy prices.
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