Several governments are concerned about the action of the ECB, which risks accentuating the economic slowdown. The Frankfurt Institution replies that its mandate consists in ensuring price stability.
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As expected, the European Central Bank (ECB) continued, Thursday, October 27, the tightening of its monetary policy, which is beginning to cause tensions with the governments of the euro zone, which are concerned about the risk of recession . It noted its interest rate of 0.75 points, to 1.5 %, an unprecedented level since 2008. “It is significant,” recognized Christine Lagarde, its president. This is the third increase in the deposit rate in three meetings, and the second successive increase of 0.75 points. Never, in the history of the ECB, created in 1998, such a rapid tightening had taken place.
The objective is to fight, to use Ms. Lagarde’s expression, against “this unprecedented increase in inflation”, which reached 9.9 % in September in the euro zone (compared to 2021). Throughout her press conference, the President of the ECB recalled that her mandate was price stability, with a 2 %inflation objective. The current hardening is therefore not finished: “We have made significant progress towards the normalization of our monetary policy, but we are not finished.” At least one additional increase in the interest rate is planned during the next December meeting, to undoubtedly bring it to 2 %. Beyond that, Ms. Lagarde refuses to commit, but the financial markets are currently counting on a rate that could go up to 3 %.
ECB’s policy – similar to those of all major Western central banks – is starting to cringe among the governments of the euro zone. In a Echos interview , on October 17, Emmanuel Macron notably sounded the alarm:” I am worried to see many experts and Some actors in European monetary policy explain to us that we should break European demand to better contain inflation. We must be very careful. “
The time is no longer” whatever It costs “
The new president of the Italian council, Giorgia Meloni, has added in this direction, worried about a “dangerous” action, which “impacts the credits of banks to families and businesses”. Not to mention the “additional difficulties for countries which, like [his], have a high public debt”.
by hardening its policy, the ECB between conflict with governments. The increase in interest rates seeks precisely to slow down “banks’ credits”, which says fears M me meloni. Conversely, Ms. Lagarde warns governments: “Budgetary measures to protect the economy from the impact of high energy prices must be temporary and aim for the most vulnerable.” Clearly, it is better to avoid the French price shield , which protects everyone and gives no incentive to reduce consumption.
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