How long will the ECB keep raising interest rates?
May 24, 2023 9:24 amVideo
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Bundesbank President Joachim Nagel on Tuesday stated that the European Central Bank (ECB) will need to raise interest rates several more times and then keep the rates at the same level for some time until inflation is fully suppressed.
Since July of last year, the ECB has raised rates by 375 basis points in total, promising further tightening of policies to combat rising prices. However, most economists believe that after the fastest rate hikes in the past 25 years, the central bank is now in the final stage of tightening monetary policy.
According to Francois Villeroy de Galhau, the head of the French central bank, interest rates will reach their peak by the end of this summer. The question remains open as to how long they will remain high.
The problem is that inflation is still at 7%, which is more than three times the ECB’s target of 2%. A slowdown, especially in terms of essential goods, may not occur until autumn.
Therefore, two or three more rate hikes may be necessary. As a result of such increases, by the end of September, the ECB deposit rate will reach 3.75% or 4.00%.
The markets have already factored in two 25 basis points rate hikes and expect a rate cut only in early 2024. However, some members of the ECB reject this notion.
The material has been provided by InstaForex Company – www.instaforex.com
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