European Central Bank jacks up key interest rates
In its biggest interest rate move since the introduction of the euro, the European Central Bank has raised its key interest rates by 0.75 percentage points to 1.25 percent. The bank's Governing Council already announced in the summer that it was abandoning its years-long zero interest rate policy. The move aims to counteract the rampant inflation in the Eurozone, currently at 9.1 percent. The monetary watchdogs have acted too late, commentators complain.
Long overdue readjustment
Christine Lagarde is taking action too late but at least she is taking action, Handelsblatt comments approvingly:
“And for the first time with verve. It was a necessary step, but by no means an adequate one to first of all curb inflation in the long term and secondly restore lost confidence. Ultimately, it is a step towards damage limitation - no more, but also no less. Damage limitation because the ECB underestimated the inflation dynamic for far too long. And because with its mantra that this was a 'temporary' phenomenon it tried to lull the world outside the Central Bank to such an extent that it bordered on denying reality. Lagarde has openly admitted these mistakes. For that, she deserves respect.”
Bowing to the pressure
El Mundo criticises the ECB as criminally short-sighted:
“The monetary authority is capitulating to the signs of unbridled inflation after a decade of facilitating easy credit and cheap money. ... The need to cool the economy, even at the risk of triggering a recession on European soil, has become unavoidable. This is the biggest interest rate hike in history: 0.75 percent. ... The ECB is to be blamed for having had many opportunities to raise rates moderately during the boom years, but ultimately being forced into an unprecedented hike when households and businesses are at their weakest: More expensive mortgages and more difficult loans now await them.”
Fatal consequences for France
The EU's second largest economy missed opportunities for crucial reforms and is paying the price now, L'Opinion explains:
“Now comes a time when money is no longer magic but tragic, because it is expensive. And that has disastrous consequences: a national debt that puts an increasing strain on the budget, a welfare state paralysed by the lack of reforms, a decline in living standards caused by dwindling growth. ... As the war continues on our doorstep, it is no doubt an exaggeration to speak of a new world. And yet that is what we have. Hopefully our politicians will not look the other way this time.”