ECB approves largest rate hike in history: 0.75 points, up to 1.25%

You will also pay a fee again. interest banks for saving their money (0.75%) for the first time since December 2011, a measure designed to drain liquidity from the economy. And they won’t be the last rises: the institution he heads. Christine Lagarde He confirmed that he expects to raise interest rates in the coming meetings to soften demand and protect against the risk of a permanent increase in the inflation outlook.

Thus, the fight against the biggest inflation spiral of the last forty years, fears for the euro economy to fall recession. Some of the most influential members of the governing council, such as the German Isabel Schnabel, have been showing signs of this in recent weeks, but others, such as the Irishman Philip Lane, have chosen to make a choice. more gradual increase from types. as in julyManagers advocating a flexible interpretation of the ECB’s mandate that takes more account of the economic situation (‘pigeons‘) were outnumbered by those advocating adhering to the goals of achieving price stability (‘Hawks‘).

The truth is that a 0.5 point increase (the other possibility that was on the table and seemed most likely until a few weeks ago), the central bank took the risk disappointing most of the marketwho was waiting strong action for its part to curb runaway inflation. If that were the case, investors’ asset sales could increase the pressure on public and private debt and European stock markets. However, with 0.75 points confirmed, the ECB risk of straining the economy The first signs of the euro are towards a recession that is already beginning to be seen.

More CPI, less GDP

this Eurozone CPI Reached all-time high in August 9.1%, from 8.9% in July. The central bank will present its new forecasts this Thursday, but in June it had already predicted that inflation would drop slightly. above target (2% in the medium term) at the end of the three-year scenario on which it bases its decisions (6.8% in 2022, 3.5% in 2023 and 2.1% in 2024). This Thursday revised them “significantly” upwards: 8.1% in 2022, 5.5% in 2023 and 2.3% in 2024.

despite unemployment Eurozone’s lowest level (6.6% in July) and GDP continues to grow (0.6% in the second quarter), some early activity indicators in different economic sectors contractile activity. While the ECB calculated that the euro area economy will grow by 6.8% this year, 3.5% next year and 2.1% in 2024 in its July forecasts, it now forecasts 3.1%, 0.9% and 1.9%, respectively. .

Schnabel acknowledged a few weeks ago that there might be a decline in GDP: growth will slow and one technical recessionespecially if Russia’s power supply is further interrupted.”