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15 June, 2024
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Lagarde announces a new interest rate hike in March

The ECB President informed the European Parliament that interest rates would be raised by 50 basis points

European Central Bank President Christine Lagarde reiterated in a speech to the European Parliament that the ECB intends to raise borrowing costs by half a point next month. "We intend to raise interest rates by 50 basis points again at our next meeting in March, taking into account the underlying inflationary pressures," Lagarde said in a speech to members of the European Parliament in Strasbourg. In a speech in London, the ECB's chief economist, Philip Lane, said the impact of recent interest rate hikes on inflation had yet to be seen.

"Monetary policy actions are tightening financing conditions, reducing credit volumes, and changing household and firm behavior," he said yesterday. "At the same time, the final impact of the measures we have taken thus far on inflation is ongoing." The decisions of the competent officials are aimed at reducing the rate of price growth to 2% from the current fourfold level. According to the models, monetary tightening will slow inflation by 1.2 percentage points in 2023 and 1.8 percentage points in 2024.

As Christine Lagarde explained, the ECB's monetary policy will be evaluated following the March meeting. Despite three months of moderated inflation, ECB officials are signaling that the battle against rising prices is far from over. They are concerned about persistent underlying price pressures that could worsen, while workers demand wage increases to compensate for the loss of purchasing power caused by soaring inflation. On the other side of the Atlantic, the Federal Reserve is facing a similar challenge, raising the prospect of more interest rate increases than previously anticipated.  Several ECB officials have now stated that next month's planned half-point rate hike is unlikely to be the last in this cycle, which is already the most aggressive in terms of monetary tightening in the institution's history.

Finally, Central Bank of Ireland Governor Gabriel Kalawf, in the same vein as Lagarde, had said late on Tuesday that he was positive about continued "strong action".



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