No way: the ECB will raise rates even in the event of a recession…
European Central Bank policymakers agreed that the institution should continue to normalize and tighten monetary policy to combat high inflation, even in the event of a shallow recession, reports from the central bank's October meeting show. . Officials noted that the inflation outlook continues to deteriorate, with inflation too high and repeatedly above forecasted figures, and that there is a growing risk that it will consolidate and that second-round effects could emerge, and a wage-price spiral. However, the central bank has hinted that it may want to suspend ongoing interest rate hikes in the event of a prolonged and deep recession, which could curb inflation to a greater extent. In October, the ECB raised its key interest rate by 75 basis points, bringing borrowing costs to the highest levels since early 2009, and there was broad consensus for a meeting-based approach to future monetary policy decisions. individual and data-dependent. Here is the rate chart
The words of the heads of the ECB should frighten people with common sense. We recall how inflation was judged “transient” for months, until it became strong and medium-term. How do you know, in its early stages, whether a recession will be “Mild” or “Persistent”? In any case, we will have that the ECB will raise rates, reinforcing the drive towards recession, even if there were already signs of it. This will only make the recession itself worse, with a good chance it will turn into a full-blown depression.
It goes without saying that the ECB always pretends to ignore the real causes of inflation, which is linked not to an excess of economic activity, as in the USA, but to an external energy shock. So the way of the ECB, faced with the difficulties, instead of saving the economy decides to reduce it to a minimum to adapt to energy. A move that we will all pay for, but what does the ECB care?
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The article Nothing to do: the ECB will raise rates even in the event of a recession… comes from Scenari Economics .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/niente-da-fare-la-bce-aumentera-i-tassi-anche-in-caso-di-recessione/ on Thu, 24 Nov 2022 21:49:55 +0000.