Just 0.25 percent: new ECB interest rate hike
The ECB has raised interest rates for the seventh time in a row in its bid to further curb inflation in the Eurozone. Inflation rates rose slightly again last month, from 6.9 to 7 percent. The ECB's decision mirrors the latest move of the US Federal Reserve, which also raised rates by 0.25 percent. Not all commentators are happy with this "mini-hike".
Lagarde making herself small
The ECB Governing Council is being too timid, the Süddeutsche Zeitung criticises:
“And that despite the fact that inflation in the Eurozone remains high and has actually increased slightly recently. At the same time, the smouldering banking crisis seems (even) less threatening than it did before. So now would be a good time to take action. But instead, ECB President Christine Lagarde insists: 'We are not pausing' - as if that were a sensible option with inflation at seven percent. Pausing once in a while is a quality that can make a person great - or small. Christine Lagarde is on the way to making herself small.”
Judicious caution
Savon Sanomat finds the ECB's cautious approach understandable:
“Its main objective is to maintain price stability in the Eurozone over the medium term, keeping inflation at 2 percent. Given the current inflation figures, a tighter interest rate policy would have been appropriate, but due to the still poor economic outlook, the central bank clearly felt compelled to use the interest rate club with restraint. In terms of the effectiveness of monetary policy we might end up regretting the ECB's cautious approach, as it could prolong the period of excessive price increases. But with the resilience of households with mortgage debt in mind, caution may be warranted.”
Between inflation and recession
Corriere della Sera warns that the benchmark interest rate hike indicates two things:
“Firstly: inflation remains very worrying. ... The second relates to the size of the hike. The 0.25 percentage point increase in the cost of money, rather than the 0.50 percentage points predicted by some, indicates how much concern there is, even in Frankfurt, where the central bank is based, about the risks of a potential recession. ... Raising interest rates means that households and businesses have to pay more for loans they need for investment or consumption: an obvious brake on the economy.”
Two percent illusory without massive restructuring
This is not the way to create financial stability, economist Jonathan Marie writes in Libération:
“Dependence on imports, whose prices or availability can change rapidly, triggering inflation, must be reduced. This also poses environmental challenges. The transition and the reduction of dependence on foreign goods require a massive restructuring of production, which in turn requires public investment in the areas of transport, infrastructure, renovation of buildings, energy production, agriculture, etc. ... Budgetary policy is crucial. But these supply restructurings can have an impact on prices. It makes no sense to focus economic policy on a two percent inflation target for which there is simply no basis.”