Two European Central Bank (ECB) officials have signalled that the end is near for the current rise in interest rates in the eurozone, the most significant and longest in the institution’s history. The worsening economic outlook for the eurozone speaks against further interest rate rises, although inflation remains high. Reuters reported today.
The end is near
The ECB raised interest rates for the ninth consecutive time on Thursday, raising the key rate by a quarter percentage point to 4.25 percent. However, it hinted that there may be a pause in interest rate hikes at the September meeting. The central bank started raising interest rates last July to curb inflation. Before that, it had held the base rate at a record low of zero percent for several years.
“It looks like we are very close to the end of interest rate hikes,” said Sturnaras, who is governor of the Bank of Greece and is among the advocates of lower interest rates. He expressed confidence that if the ECB were to raise interest rates again in September, it would be the last increase.
Nothing is certain
KažimÃr, who is the governor of the Slovak central bank, is more accommodating to higher interest rates than Sturnaras. While he also said that interest rate hikes are coming to an end, he warned that a possible September pause in interest rate hikes should not automatically be seen as the end of monetary tightening.
The annual inflation rate in the eurozone fell to 5.5 percent in June from 6.1 percent in May. However, it remains well above the ECB’s 2 per cent target.
The euro area’s gross domestic product (GDP) remained unchanged in the first quarter of this year, after falling by 0.1 percent in the previous three months. The euro area thus narrowly avoided a technical recession, which is usually defined as two consecutive quarters of economic contraction.
Source: ÄŒTK
