The European Central Bank (ECB) will further raise interest rates in the euro area in July to reduce inflation. ECB President Christine Lagarde said this at the annual meeting of central bankers in Sintra, Portugal. Lagarde said interest rates were unlikely to peak any time soon. Which means as much as that there are still more hikes in the pipeline.
Earlier this month, the ECB raised its key interest rate by a quarter of a percentage point. The purpose of raising interest rates is to make loans more expensive and therefore less attractive. This will reduce the demand for goods and services and slow down the economy somewhat.
The new interest rate decision will fall after the summer, on September 14 to be exact.
Communication
In her speech in Sintra, Lagarde also said that the ECB “must communicate clearly that interest rates will have to remain at their highest levels for as long as necessary”. The ECB therefore seems to want to prevent financial markets from speculating on a rapid policy reversal and preparing for interest rate cuts. This should also ensure that the full impact of previous interest rate hikes becomes clear.
Lagarde believes that the first effects of the rate hikes are already visible, especially in the manufacturing and construction sectors, two sectors more sensitive to higher financial costs. At the same time, the ECB president has warned that inflation should be driven by wage recovery, so the battle against price hikes is not over yet.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
