Business

After an emergency meeting, the ECB promises “some flexibility” in the face of spectacular rate hikes in Europe

After an emergency meeting, the ECB promises “some flexibility” in the face of spectacular rate hikes in Europe
Written by madishthestylebar

At a time when soaring borrowing costs for eurozone governments, following the announcement of a tightening of monetary policy, are raising the specter of a sovereign debt crisis, the Board of Governors of the Central Bank (ECB) held an exceptional meeting of its Board of Governors on Wednesday 15 June.

Read also: Article reserved for our subscribers In Europe, a spectacular rise in interest rates

At the end of the latter, the institution announced that it “will apply some flexibility in reinvestment” bonds held under its emergency program launched during the pandemic (PEPP). The ECB has also instructed its teams “to speed up” the design of a new instrument “anti-fragmentation” to combat an excessive spread of interest rates between northern and southern countries of the euro zone.

The aim is to calm recent tensions on Italy’s borrowing rates in particular, as the pandemic has “left lasting vulnerabilities” in the euro area. However, no details on the content of this instrument or its timetable for adoption were given.

Bruno Le Maire for a monetary policy that is “well targeted”

Shortly before this emergency meeting, Bruno Le Maire, the French Minister for the Economy, considered that the normalization of European monetary policy “must be done gradually and in advance”: “We don’t want brutality, we don’t want decisions that could take economic players by surprise and which ultimately would create more economic difficulties than anything else”said the minister, who was speaking on the sidelines of the Salon Vivatech in Paris.

“We can clearly see that what guarantees the maintenance of growth – which is our priority –, the maintenance of job creation, the ability to finance the ecological transition, is visibility”detailed the Mayor, adding that “It’s the choice that was made by the European Central Bank, it’s the choice that was made by Christine Lagarde, and it seems to me the only wise choice”. He also pleaded for a monetary policy that is “well targeted”with a ” balance “ necessary between the fight against inflation and support for economic growth.

Read also: Inflation: the ECB announces a series of rate hikes from July, a first in more than a decade

Central bank concerns

This emergency meeting of the Governing Council of the ECB came as the sovereign debt market has been experiencing severe turbulence since the central bank announced last week its intention to increase its key rates from July to combat inflation. The US Federal Reserve (Fed) could also announce its largest rate hike since 1994.

“There is inflation in Europe which is different from inflation in the United States. There is an economic situation in Europe which is different from the American situation. We therefore want to have a European monetary policy which normalizes gradually and without brutality”said Bruno Le Maire.

Read also: Article reserved for our subscribers Faced with inflation, central bankers “very worried”

The World with AFP

#emergency #meeting #ECB #promises #flexibility #face #spectacular #rate #hikes #Europe

About the author

madishthestylebar

Leave a Comment