The ECB’s decision justified persistence of strong inflationary pressures. All future decisions on interest rates at the ECB will be taken in such a way as to bring inflation back to the 2% target, the statement reads. No concrete promises or signals regarding future rate movements have been made by the European Central Bank.
According to preliminary Eurostat data, in April, annual inflation (i.e. April 2022) in eurozone countries stood at 7%, slightly accelerating from 6.9 % in March. Prices for food, alcohol and tobacco increased mainly in April. For 2022, annual inflation in the countries of the euro zone averaged 9.2% (from one country to another, the indicators vary greatly and differ significantly).
At the February and March meetings, the ECB raised the policy rate by 0.5 percentage point, as before in December. In September and October 2022, the ECB raised the rate by 0.75 percentage points, in July – by 0.5 percentage points (this was the first rate hike since 2011, then it went from 0 % to 0.5%).
On Wednesday, the US Federal Reserve (FRS) raised the interest rate by a minimum step of 0.25 percentage points. Today, the interest rate range in the United States is 5 to 5.25% per annum, which has not been this high for sixteen years. The Fed raised rates for the tenth consecutive meeting.
At the same time, the Fed signaled that it could suspend the annual tightening cycle in June: the words about the need for further monetary policy tightening disappeared from the press release after the meeting of on Wednesday as officials assess inflationary pressures and the impact of a series of U.S. bank failures on lending conditions. US inflation has slowed since the middle of last year, but price pressure remains high, Fed chief Jerome Powell said. Returning inflation to target in the United States will likely require a weakening labor market, said Anna Builakova, an analyst at FG Finam.
As Rossiyskaya Gazeta previously wrote, the cycle of monetary policy tightening by the Fed and the ECB as a whole is coming to an end. Another rate hike by the world’s biggest central banks could push the US and European economies into recession due to overpriced loans, and also seriously increase the risk of a global economic crisis.
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