For de Guindos, the vice president of the ECB, “we will continue to raise interest rates despite the risk of a recession”.

Luis de Guindos is the vice president of the ECB, the European Central Bank, and he just explained to us that his institution will continue to raise its rates despite the risk of a recession!

The ECB will continue to raise key interest rates until inflation returns to the long-term average target that is part of the central bank’s mandate.

Inflation should not exceed 2%.

Luis de Guindos clarified that the interest rate hike that will be decided in December depends on the latest economic forecasts for the Eurozone and inflation figures for November.

“I can tell you that our approach will always be the same, we will continue to raise interest rates to a level that allows us to ensure that inflation converges to our definition of price stability.”

If the ECB had raised interest rates by 0.75% last time, it would only have to raise them by 0.50% this time, which would bring base rates to +2%, when they are currently only +1.5% and we were still in negative territory at -0.5% a few months ago.

Also according to the Vice President, the ECB expects inflation to slow down in the first quarter of 2023 or in the first half of 2023, which would make sense since most of the inflation shock is related to the energy shock due to the interruptions in gas production . Russian deliveries are behind us.

Behind us for this first phase.

Indeed, the question of replenishment will soon arise and from mid-2023, when gas reserves will be depleted, which are far from guaranteed, and with a price adjustment that could push prices up and trigger a second wave of inflation with a new energy shock in preparation for winter 2023/2024.

Charles SANNAT

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Source news agency Reuters via here

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