Inflation: Analysts expect a historic ECB rates rise this Thursday
In July, the ECB announced a 50 basis point rate hike. The increase could be 75 points this time.
What will the European Central Bank do this Thursday? If analysts are to be believed, the ECB should accelerate the tightening of its monetary policy by deciding on a rate hike of an unprecedented scale.
ECB rates rise
"We expect a rate hike of 75 basis points," says Franck Dixmier, director of bond management at Allianz Global Investors, illustrating the shift in the consensus of observers who initially expected a 50-point increase in key interest rates.
Such an increase would be a first for the monetary institute in its two decades of existence.
"Given the level of inflation and the uncertainty about future price developments, there is less risk for the ECB to do more than to do less," explains Franck Dixmier. In July, it had a firm hand in announcing a surprise increase of 50 basis points, when 25 points were expected.
ECB rates rise historic
This first increase in more than a decade came after a long period of cheap money that helped stimulate the economy. The guardians of the euro have thus put an end to eight years of negative rates at once by reducing the rate on banks' deposits with the ECB from -0.5% to 0%.
The promise was then to do the same in September unless inflationary pressures ebb. However, the opposite has happened. Prices rose in August by 9.1% year-on-year in the eurozone. Inflation is thus well above the 2% rate targeted by the ECB.
The new tensions in energy prices even portend double-digit inflation soon. In this ebullient context, there remains within the ECB a fraction of decision-makers who still defend "gradualism" in terms of rate hikes, with chief economist Philip Lane leading the way. But this clan "is in the minority," notes Bruno Cavalier, economist at Oddo.
ECB rates rise euro
Above all, the weakness of the euro, which sank below the $0.99 threshold on Monday, is another argument arguing for a monetary blow. A weak euro increases the bill for imported products, which fuels inflation. If a central bank delays adapting its policy, "the costs can be considerable," admitted Isabel Schnabel, an influential member of the ECB's executive board, at the end of August, acknowledging that the Bank had believed for too long that the inflationary shock would be temporary. However, the public must maintain "confidence in our ability to preserve purchasing power".
The rates of the US Federal Reserve are between 2.25 and 2.50% and a rise of 75 basis points is looming on September 21. For the ECB, whose rates range between 0% and 0.75%, the turn of the screw should continue "until policy rates reach a more neutral level, between 1% and 2%," according to Frederik Ducrozet, chief economist at Pictet Wealth Management. A rate is said to be neutral when it neither stimulates nor slows down the economy.
- Don't worry Melenchon shouted everywhere that the debt was just paper and that we will never repay it, friends praetors it's up to you to draw conclusions, Argentina Greece etc... they had thought like Mélenchon.
- The problem is that the FED will not go all the way as the brave Paul Volcker did in his time. Which, after a short period of recession, allowed the longest period of growth ever seen (we don't make omelets without breaking eggs, contrary to what we want to believe...). The real rates remaining negative, we will unfortunately have both recession and inflation, all this only to please Wall Street...(In the short term in addition...)
