Tazaa News latest news updates,
The European Central Bank raised interest rates again on Thursday, signaling it “remains on track” in tightening its monetary policy, even as skyrocketing inflation starts to ease.
Frankfurt, Germany (UrduPoint / Pakistan Point News – 2nd Feb, 2023) : The European Central Bank raised interest rates again on Thursday, signaling that it is tightening its monetary policy, even as skyrocketing inflation starts to ease. .
The ECB raised its key rates by half a percentage point, as expected, to curb rising energy and food prices caused by Russia’s invasion of Ukraine.
The Frankfurt-based institution has now raised borrowing costs by three percent after launching an unprecedented monetary tightening campaign in July.
Also on Thursday, the Bank of England raised rates for the 10th time in a row, while the US Federal Reserve raised borrowing costs again on Wednesday, albeit at a slower pace.
Signs are mounting that the euro zone may have weathered its worst economic shock, with inflation falling from its peak in October and the single currency area on track to grow by the end of 2022.
But with its latest rate hike, the bank said it “remains on a steady pace of rate hikes” and will continue to repeat the same bearish language used since its December meeting.
It said the ECB intends to raise interest rates by another 50 basis points at its next monetary policy meeting in March and will then assess its monetary policy path further.
– High inflation – While consumer price growth in the 20-nation currency club fell to 8.5 percent, it is still above the ECB’s two percent target.
Thursday’s rate hike was the ECB’s fifth in a row.
Its three main rates are now in the range of 2.50 to 3.25 percent.
That followed a half-point rise in December, but was lower than the two highs of 75 before that.
However, there is already debate among politicians about when to start slowing down.
Recent rather gloomy data have led to hope that Russia’s efforts to choke off vital gas supplies to Europe may not cause the economic shock that was once feared.
As Moscow slashed shipments after its invasion of Ukraine, European governments took relief measures to relieve consumers and businesses of rising prices and rushed to fill warehouses.
Wholesale gas prices were lower, while relatively mild winter weather meant that supplies did not run out as quickly as expected.
– Signs of weakness – Analysts hope that other factors, such as the easing of supply chain problems and the reopening of China’s economy, which has been affected by Covid, will now offset the decline in Ukraine.
However, signs of weakness are still a cause for concern.
Europe’s top economy, Germany, unexpectedly shrank at the end of 2022, suggesting it may be headed for recession.
But it is expected to be a modest decline, and the government has forecast that the economy as a whole will expand slightly in 2023.
While the ECB has stressed its determination to bring inflation back to its target, policymakers have walked a fine line – trying to tighten just enough, but not so much as to significantly deepen the economic pain across Europe.
