ECB avoids setting a ceiling on rate hike

Vice President of the European Central Bank (ECB), Luis de GuindosHe declined to specify what level he might raise interest rates this Wednesday. interest officials are trying to stop the inflationary spiral of the institution. “How far can we go? I do not know. And if someone tells you, don’t believe it too much,” he answered a question that came to him during a speech he gave at a course organized by the Association of Economic Information Journalists (APIE) and Menéndez Pelayo University.

In recent months, several members of the monetary authority’s board have hinted that interest rates may change. rise to what is known as natural or neutral, that is, a policy that does not imply monetary policy. neither expansive nor restrictive. The debate is over what this level is. On behalf of the Governor of the Bank of Spain, Pablo Hernandez de Cos It would be around 1% or slightly above, but other admins see it closer to 2%. “If you ask a hundred economists, hundreds of different answers“, Guindos made the irony.

Thus, the idea that the ECB could increase interest rates caught in the market. about 1.5%but Guindos preferred specify. Inflation does not give up negative surprisesthat the monetary authority does not want to tie their hands. this Federal Reservein fact, he already pointed out that it would increase the price of money The risk of the US economy going into recession in the coming quarters is high.

anti-fragmentation

The former Minister of Economy is also a member of the ECB. tool to prevent “unwanted” financial fragmentation (i.e. growth of risk premiums in countries with more fragile public finances, e.g. Spain and Italy, above what is justified according to the sustainability of their accounts). Guindos, in this line, is a part of the new mechanism. “quite a different nature” to the UNWTO program (Certain Monetary Transactions) 2012 because “the situation is different”.

Although he did not give any details, Guindos thus seems to imply that there will be no new mechanism to target “specific” countries. such strict conditions Like OMT. In the midst of the public debt crisis of ten years ago, the ECB designed this instrument open to the direct and mass acquisition of a country’s securities, but under harsh economic policy conditions. government not requested.

Guindos pointed out that yes, the ECB will activate this new mechanism based on a number of foundations. economic indicators (risk premium, cost of financing, market liquidity and fundamentals of the economy), but also its own “economic judgmentBut this is not an exact science.

Source: Informacion

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