What did the ECB decide?
The post-meeting ECB comment by Dave Chappell, bond market manager at Columbia Threadneedle Investments
In contrast to the recent signals from the United Kingdom and the USA , the ECB maintained its previous orientation, increasing rates by 50 basis points and pre-committing to a further half point increase at the next meeting in March. From that moment it will evaluate the subsequent course of its monetary policy.
THE ECB ASSESSMENTS ON ENERGY PRICES AND INFLATION
The outlook was judged to be less gloomy than at the last Council meeting, thanks mainly to significantly lower energy costs and rising incomes. Conversely, food prices continue to rise and core inflation, while stable compared to the December level, is still too high.
The risks to economic growth have become more balanced, as have those to inflation, at least in the short term.
THE RISK OF GLOBAL RECESSION
An external factor weakening growth could come from a further global recession, while an acceleration of the recovery in China could pose a risk of higher growth and inflation. While any sudden tightening of credit conditions, both for businesses and for households, could act as an internal factor to weaken growth.
WHAT WILL CHANGE FROM HERE TO JUNE
Even if the March meeting looks stuck at +50 basis points, global conditions could be very different when the commission meets in mid-June.
While President Lagarde has stressed that there is still a lot to do after that, the central bank could find itself alone in continuing to pursue monetary policy in tight territory.
The end seems to be near and the markets have perceived it.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/bce-aumento-tassi-50-punti/ on Thu, 02 Feb 2023 15:21:20 +0000.