In the face of inflation, the European Central Bank decided to increase the historical interest rate

Christine Lagarde, President of the European Central Bank (ECB) speaks at a press conference following the European Central Bank's monetary policy meeting in Frankfurt, Germany, September 8, 2022. REUTERS/Kai Pfaffenbach REFILE - QUALITY REPEAT

Save who can at the European Central Bank (ECB)! The monetary institution, Thursday, September 8, raised its deposit rate by 0.75 points in one go, to 0.75%. During its history, the European Central Bank had only made such a high during its first meeting, in 1999. At the time, it was a fundamentally technical decision, the creation of the single currency. This time there is a fire. Eurozone inflation reached 9.1% in August (on an annual basis), while the goal is to keep it at around 2% over the long term.

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Inflation is too high and it will It will probably stay that way for a long time.”, confirms Christine Lagarde, its president. During the hour that her press conference lasted, the guardian of the euro said it and repeated it “determination” Reduce the inflation rate to 2%. So it announces that Thursday’s increase is only the beginning. “In our upcoming meetings (which take place every six weeks), we plan to raise interest rates further.”

Methodically

MI Lagarde specified that the next increases would not necessarily be 0.75 points at a time, and that the situation would be systematically reassessed, but the trend is clear: by the end of the year, the ECB deposit rate, which was negative between June 2014. and July of this year, is likely be close to 2%. You have to go back to 2008 to find such a level.

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It’s the end of an era, said Mr.I guarding. My predecessors spent their time fighting economic downturns. This is why we set negative interest rates. It’s been years since we fought inflation. » The ECB president acknowledges that the current challenge is the credibility of the institution she leads. ” In the end, [celle-ci] Our ability to bring inflation back to its 2% target will be judged or not. »

Over the past year, the European Central Bank’s governing council has appeared to be overwhelmed by the reality of rising prices. In December 2021 ADI Lagarde was still announcing that this year’s rate hike was “unlikely”. Same in June: ECB announcements turned out to be outdated in a few weeks. Then the monetary institution made the unusual decision to announce, a month ago, a 0.25 point increase in its rate for July. Finally after a month it was 0.5 points.

“The European Central Bank gives a negative signal to companies, and it pushes them to cut investment and hiring,” Nicolas Gutzman, head of macroeconomic strategy at La Financière de la Cité.

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