ECB Minutes: Latest Rate Increase Leaves Level Still Highly Accommodative
October 6, 2022
Hawkish minutes published today by the European Central Bank’s Governing Council meeting of September 7-8 shed useful information behind the record 75-basis point interest rate hike decided then. Officials recognize the onset of recessionary conditions yet are adamant that such mustn’t prevent needed forceful interest rate increases. Inflation risks are deemed skewed to the upside over the entire projection period, and while supply shocks played a key role, it is imperative that second-order inflation be prevented and that inflation expectations not destabilize in response. A discussion between raising rates by 50 bps or 75 bps occurred at September’s meeting, and the bigger move won out. Future policy actions will continue to be data dependent. There could be more increases as large as 75 bps, but that is not a foregone conclusion. The one certainty is that current very negative short-term real interest rates means that many additional interest rate hikes will be forthcoming.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: European Central Bank
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