Inflation: ECB reacts with another interest rate hike

Despite a dip in inflation the ECB has raised the key interest rate for the fifth time in eight months. Up 0.5 points, it now stands at 3 percent. Inflation in Europe is still far too high, ECB chief Christine Lagarde said on Thursday. Is this the right approach?

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taz, die tageszeitung (DE) /

Dreadful timing

Rising interest rates are not without risks, warns the taz:

“A rise in interest rates means fewer loans are granted. Many factories are no longer able to make investments, and new buildings also become rare because mortgages get expensive. Demand falls, which then pushes down prices, creating an artificial recession which usually results in rising unemployment as well. So no one should be happy to see interest rates rising - not even savers. For the central banks can only act at the risk of causing an economic crisis. That is never favourable, but right now is really bad timing. The war in Ukraine is already making things tough enough for all of Europe.”

La Repubblica (IT) /

Not the right strategy

The interest hike is a mistake, says La Repubblica:

“Above all because Lagarde has not taken into account the opinion of many economists, including Nobel Prize winner Joseph Stiglitz, that the current inflation cannot be fought with monetary policy. ... It was caused by rising energy prices, the war and supply chain bottlenecks that began with the pandemic. Events over which the ECB's monetary policy can have little influence. Now the bottlenecks are resolving and energy prices are falling due to lower demand and high inventories. ... To further contain inflation, we don't need interest rate hikes that penalise businesses and could plunge the economy into recession. We need targeted interventions.”

The Irish Times (IE) /

Wait and see now

The Irish Times wonders whether the latest increase wasn't premature:

“Central banks, including the ECB, need to be cautious and to be guided by the emerging data. There has certainly been a justification for increasing interest rates over recent months as inflation soared. Now, however, growth is slowing and inflationary pressures are easing. The outlook is uncertain. It seems sensible to wait and see what figures now emerge to decide what further increases are justified and when. ... Further increases from here on need to be based on the evidence.”

De Standaard (BE) /

Improved outlook but not time to celebrate yet

De Standaard voices relief but also warns:

“We seem to have escaped even more stubborn inflation, possibly also due to the strict intervention of the central banks. But it is still too early to pop the champagne corks. There are still unanswered questions. The first and most important is how the Russian aggression in Ukraine will progress. ... We also don't know for sure whether the spectre of inflation has really been banished. Many consumers and entrepreneurs still have the feeling that prices, wages and interest rates are getting out of control. They are adapting their behaviour accordingly. ... But it is good that after an unstable 2022, 2023 offers more cause for optimism.”