Several members of the European Central Bank (ECB) argued at their last monetary policy meeting, held between September 7 and 8, that the possibility of a recession in the eurozone should not be an excuse for not raising rates and curbing the high inflation, according to the minutes of said meeting, published yesterday. On that day, central bankers admitted that much of today's price rise stems from supply factors, though they concluded that placing too much emphasis on such analysis "could risk negating the fact that aggregate demand should adjust to curb inflation." ”.
In this way, the governing council had to face the "difficult dilemma" of ensuring that inflation returns to its target in time without unnecessarily exacerbating a slowdown. "However, it was argued that growth problems should in no case prevent a necessary forceful increase in interest rates," the document reads. Furthermore, ECB advisers indicated that, without a timely cut in rates, inflationary pressures from the euro's depreciation could rise.
In this sense, the bankers discussed that the primary responsibility of the ECB is to counteract the effects of the second round and prevent inflation expectations from becoming unanchored and that these risks were more persistent than previously believed. Presented with this dilemma between economic growth and inflation, the governing council determined that its response to upward deviations from the ECB's inflation target should be as forceful as when inflation had been very low.
