With many of its peers, particularly the US Federal Reserve, raising rates quicker than anticipated, pressure is growing on the ECB to quicken the pace of its own"normalisation" to fight off a surge in inflation that was now at risk of getting entrenched.
"I think it's enough to say that the size of the September increment will reflect our ongoing or evolving assessment, rather than revisit the size of the increment in July," Professor Lane said. Meeting earlier this month, the ECB said that unless the inflation outlook improved, it would have to lift rates by more than 25 basis points in September, a deliberately vague formulation that gives policymakers some leeway.
Inflation hit a record high 8.1% last month and could still go higher in the coming months, raising the risk that workers start demanding bigger pay increases, entrenching high inflation via a hard-to-beat wage-price spiral.
I wouldn’t carve what the ecb 💶’s Chief Economist forecasts into a beer mat. May y/y German factory gate prices of 33.6% belie his macroeconomic analysis of Eurozone inflation. His role as fall guy is now sealed. All one can do is insulate 🇪🇺 from a US leveraged loan market 📉
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ECB's Lagarde sticks to rate-hike plansEuropean Central bank President Christine Lagarde has reaffirmed plans to raise the ECB's interest rates twice this summer while fighting widening spreads in the borrowing costs of different euro zone countries.
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