2023-08-25 09:54:51
ECB
In the fight against inflation, the ECB has already raised interest rates nine times in a row since the summer of 2022.
(Photo: dpa)
Jackson Hole According to insiders, monetary authorities at the European Central Bank (ECB) are increasingly concerned about the deteriorating economic outlook. The likelihood of a rate pause is increasing, even if the debate is ongoing, several people familiar with the discussions told Reuters.
In the fight against inflation, the ECB has raised interest rates nine times in a row since the summer of 2022 – most recently by a quarter of a percentage point in July. The deposit rate, which is important in the financial market and which financial institutions receive for parking surplus funds, is now 3.75 percent – the highest level in 23 years. For the next interest rate meeting on September 14, the ECB has so far left all options open.
Discussions with eight monetary authorities in Europe and on the fringes of the central bank symposium in Jackson Hole meanwhile indicate that the mood is changing. Over the past six weeks, several key economic indicators have fallen short of expectations. “The number of voices calling for a pause is increasing as data comes in,” one of the insiders said.
Several euro watchdogs noted they now see the odds evenly split between a hike and a break. On the other hand, a smaller number of monetary authorities saw a pause as more likely. None of the monetary authorities considered a hike the most likely outcome, even if that is their preferred option. Six weeks ago, on the other hand, an increase was seen as the most likely scenario. The ECB declined to comment.
All insiders agreed that even if interest rates were to be paused in September, the ECB would need to make it clear that its work is not done and further rate hikes may be needed. It could be months, perhaps until early 2024, before one can be sure that euro-area inflation is moving towards the ECB’s 2% target. Most recently, inflation was 5.3 percent.
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