How much will (eventually) increase ECB V interest rates; As expected, the bank did not give a clear answer after its Thursday meeting. However, he said that after an announced 50 basis point rate hike now and an “anticipated” further 50 basis point hike on March 16, his officials will reconsider the trajectory of a further tightening at their May 4 meeting. Many members of the ECB Board of Directors are now likely to want to raise interest rates by at least another 50 basis points in the second quarter of 2023.
When asked about a possible peak in interest rates, ECB President Christine Lagarde he stressed that “we won’t be there in March.” However, ECB management, which is dependent on post-March economic outlook data, is consistent with our forecast that it will secure a final 25 bps rate hike in May. Moreover, as expected, the ECB left unchanged the keywords of its monetary policy. The bank wants to stay the course and raise interest rates significantly at a sustainable pace. While this already suggests that the next move in March will again be 50 basis points, the ECB then stated more clearly than before that it “intends to raise interest rates by another 50 basis points at the next monetary policy meeting” . in March”.
However, his direction for continuing is losing its clarity. On the one hand, the “steady pace” may signal an upcoming upside of more than 50 bp. On the other hand, however, the ECB stressed that after the March meeting “it will assess the future course of its monetary policy.” This opens the door for movement or movements of the order of 25 m/min. starting from May. After a slowdown in growth and rising inflation, mainly due to high energy and food prices as a result of the war in Ukraine, the outlook for the eurozone has improved significantly over the past four months. Putin’s shock is passing, and gas prices have fallen to less prohibitive levels. And to some extent, the ECB acknowledged this at Thursday’s meeting. Finally, with regard to the difference in interest rates between the Eurozone and the US, it will shrink even more. With the Fed raising 25 basis points and the ECB 50 basis points higher, the gap is starting to narrow.
* Mr. Holger Schmieding is an economist at Berenberg Bank.
Source: Kathimerini
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