Euro zone: late awakening for the ECB

Despite the recent rise, the level of interest rates is still far from being able to stem inflation.
The European Central Bank (ECB) has decided to strike a blow. On July 21, it raised its three key rates by 50 basis points, that of deposits thus rising from -0.5 to 0%.

This increase, the first in eleven years, marks the end of the period of negative interest rates that began in 2014. More important than expected, this monetary tightening was impatiently awaited by economic circles, who saw the other central banks in action since months.

Starting with the American Federal Reserve (Fed) with, since last March, an upward cycle of rates which should bring them between 3.25 and 3.5% at the end of the year. For the ECB, analysts expect further tightening from next September, before a stabilization expected in 2023 between 1.25 and 2%, according to forecasts.

Divergent national interests
Will this be enough to stem inflation that continues to rise (8.6% year-on-year last month), approaching the level of the United States (9.1%)? Many experts doubt it. The nature of inflation is however different on both sides of the Atlantic, explains Samy Chaar, chief economist at Lombard Odier bank. Stating that underlying inflation (long-term price evolution) is around 3.5% in Europe, against 6% in the United States.

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