Pierre, a member of the European Central Bank’s board of directors and head of the Belgian central bank, said the European Central Bank should continue to raise interest rates to deal with inflation even in the recession of the euro area.・ Wunsch said.
Raising the ECB’s deposit rate to 1.5% is “not a headache,” Wunsch said, unless the economy goes into a “serious recession.” Last week, banks raised interest rates for the first time in more than a decade, raising deposit rates from minus 0.5% to zero.
Wunsch is one of the most hawkish members of the 25-member pricing group. In an interview, he identified the possibility that the region would experience a technological recession with a slight contraction compared to a sharp economic downturn after strong economic growth in 2021.
The economic outlook is deteriorating at 8.6% in June as eurozone policymakers step up their efforts to tackle record high inflation. Germany, the largest economy in the euro area,Be at the forefront of recession“. The Ifo Institute for Economic Research reported on Monday that corporate sentiment had fallen again.
Policymakers are in a “very difficult situation,” the economy is “decelerating, and inflation continues to be upwardly surprised,” Unsh said.
“Every week there’s something to show that we’re not at the end of these dynamics, and we’re getting closer and closer to what looks like some sort of stagflation,” he said with stagnant economic growth and high. He mentioned the combination of inflation. “It wasn’t observed in the 70’s and 80’s, but it’s not entirely different,” he added.
Last weekend, ECB president Christine Lagarde I wrote in a blog post “We will continue to raise interest rates as long as necessary to bring inflation down to our target in the medium term,” said the policymaker. This is 2 percent.
Much of eurozone inflation was triggered by rising energy prices and exacerbated by the Russian war in Ukraine, which led banks to take longer to raise interest rates and end their bond-buying programs, with little that banks could do. Do this to control those price increases. But as inflation spread to more commodities and services and increased the risk of settling in the economy, banks doubled their rates last week.
Mr Unsh said his preferred course of action in light of the economic outlook was to raise interest rates by half percent and slow down as deposit rates approach 1.5 percent. The central bank withdrew some of the so-called forward guidance on interest rates last week. In this guidance, the central bank sends a strong signal to the market about what it plans to do in the future, instead “conference-conference approach.”
