No rush, but no pauses. Little by little, but with a firm step. The chief economist of the European Central Bank (ECB), the Irish Philip Lane, is in favor of raising interest rates in the eurozone at "a constant rate", that is, "neither too slow nor too fast", because this will allow " make mid-course corrections” if necessary.
Amidst the debate over whether the European monetary authority should be more aggressive in fighting inflation, Lane defended a less radical stance, when the market is rumored that the central bank chaired by Christine Lagarde could even choose to raise the price of money by 75 basis points (0.75%) at its next meeting in September.
At the moment the ECB approved last month a hike of 0.50 points, the first in eleven years, thus returning to positive territory after a long period of monetary stimuli. But inflation climbed last July to 9.8%, the highest since the introduction of the single currency. And the central bank's mandate plans to place the rate at 2% in the medium term, with which there are those who argue that more should be done, in line with what the United States Federal Reserve is already planning, as insinuated these days at the Jackson Hole meeting by its president, Jerome Powell.
“In our new 12-month forecasts, we assume that central banks will tighten their monetary policies much more than market participants expect, especially in Europe. Both the Fed and the ECB seem determined to restore their credibility and keep a tight rein on inflation expectations, even at the cost of causing an economic downturn,” said Stefan Kreuzkamp, chief investment officer at DWS.
Lane, who participated yesterday in a round table held in Barcelona within the framework of the annual meeting organized by the Central Bank Research Association (Cebra) and the Barcelona School of Economics (BSE) at Pompeu University Fabra (UPF), limited himself to saying that the next meeting of the Governing Council of the ECB will represent "the beginning of a new stage", in which the data will have to be analyzed "meeting by meeting" given the economic conditions of "high uncertainty ”.
The softer position of Lane, who has a strong influence on Christine Lagarde, could prevail at the cost of the so-called hawks, who would favor a more incisive intervention.
