European Central Bank to Increase Interest Rates Due to Stubborn Inflation

03/19/2023 00:14 • Metaverse & Beyond • 122 views

According to reports, European Central Bank (ECB) Regulatory Commission Holtzman said that inflation is more stubborn than expected, and most people believe that more interest rate hikes are needed. I expect several more rate hikes, and I am concerned that the ECB’s peak interest rate will be higher than 4%. (Oriental Wealth)

European Central Bank Regulatory Commission Holzmann: Most people believe that more interest rate hikes are needed

Analysis based on this information:

The European Central Bank (ECB) has been facing a challenge with stubborn inflation levels. According to reports, the ECB’s Regulatory Commission Holtzman has stated that inflation is more persistent than expected. As a result, the majority of people believe that there is a need for more interest rate hikes to combat inflation.

Many economists believe that increasing interest rates can help to reduce inflation. When interest rates rise, borrowing and spending decrease which results in lower inflation rates. Due to this reason, ECB has increased interest rates in small increments since 2018. However, the effects of these interest rate hikes have not been enough to combat inflation as the levels remain stubbornly high.

According to Holtzman, the ECB needs to continue to raise interest rates and expects to execute several more rate hikes to control stubborn inflation. This statement may be interpreted as the ECB taking serious actions to maintain their price stability mandate. As per the mandate, the ECB is committed to keeping inflation below, but close to 2% for the euro area over the medium term.

In addition, Holtzman also expressed his concern that the ECB’s peak interest rate could cross 4% to combat stubborn inflation. Crossing 4% seems like a significant concern as it is the highest rate since 2008 when the financial crisis struck. This implies that the ECB may enforce stricter monetary policies in the coming years, aiming to contain higher inflation rates.

In conclusion, the ECB regulatory commission’s statement on inflation persistence and its need for more interest rate hikes sheds a light on how the ECB may respond to inflation in the near future. The commission may take more aggressive monetary policies to keep inflation rates under control. It is essential to keep an eye on how this unfolds in the coming months and the impact it may have on the overall economy.

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