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The president of the European issuer announced that those responsible for monetary policy will try to raise interest rates in July to alleviate inflation in the eurozone, which has been pushed by energy prices.
The end of an era. The European Central Bank, ECB, would raise interest rates in July to curb runaway inflation in the eurozone, following a global trend that would end an 8-year period of keeping interest rates near zero.
In an article posted on the issuer’s website, ECB President Christine Lagarde said she expects the asset purchases that are driving the economy to end “very soon in the third quarter.”
“This would allow us to hike rates at our July meeting, in line with our forward guidance,” he wrote. “Based on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter,” the official added.
The European Central Bank, the entity of the 19 countries that use the euro currency, lagged behind the rest of the world in terms of interest rate hikes aimed at fighting inflation. Consumer prices started to rise as countries recovered from the pandemic and then worsened as the effects of the Russian invasion of Ukraine brought with it higher energy and food prices.
In the eurozone, year-on-year inflation hit 7.4% in April, boosted by energy prices, which are heavily reliant on Russian oil and natural gas. The situation raised the bills for public services, food and even paralyzed some public works projects in Italy.
The US Federal Reserve was more aggressive than the ECB, in part because its leaders are concerned that US inflation has spread more widely through the economy, while European prices are linked to rising energy prices. and food, stemming from the Russian invasion of Ukraine.
The Bank of England has raised key interest rates four times since December, and inflation spiked last month to a four-decade high of 9%. Meanwhile, in the United States, the Fed raised them this month to alleviate inflation, which is around 8.3% annually, the highest in 40 years. In addition, they expect more increases in the coming months.
Lagarde is expected to announce the hikes during the next ECB meeting in Amsterdam in early June. The official assured that it was not clear if there would be more rate hikes because “supply shocks are increasing inflation and slowing growth in the short term”, so the bank would have to closely monitor the evolution of economic conditions. .
The European Union cut its economic growth forecasts for the 27 countries from 4% this year to 2.7% due to the fallout from the war in Ukraine.
with AP
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