European Central Bank chief Christine Lagarde reiterated Wednesday (15 February) that the institution plans to raise its interest rates by a half percentage point even as the eurozone’s economic outlook improves.
Data released on Monday showed the 20-nation currency bloc dodged a recession at the end of last year by posting weak-but-positive growth of 0.1%, while inflation has been easing – even if it remains at a high 8.5%.
“In view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March,” Lagarde told lawmakers at the European Parliament.
She added it would then evaluate the subsequent path for monetary policy, reiterating the message the bank delivered after hiking rates by a half percentage point on February 2.
The ECB will publish updated economic forecasts at its March meeting, which will help it formulate the course for monetary policy.
If the central bank goes through with the half-point hike in interest rates, it would be its sixth increase since July for a total increase of 3.5 percentage points.
The rates are approaching the point where analysts consider them restrictive, or high enough where they slow consumption and investment, which in turn reduces pressure on prices.
“Keeping interest rates at restrictive levels will, over time, reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift in inflation expectations,” said Lagarde.
Policy rate decisions would be data-dependent and follow a meeting-by-meeting approach after March, she added.
Lagarde’s speech was delayed by more than three hours due to Kurdish activists demonstrating inside the parliament building on the 24th anniversary of Turkey’s arrest of their leader Abdullah Ocalan.
*first published in: Euractiv.com
By: N. Peter Kramer
