At the end of the interview of the head of the ECB, the euro fell in the foreign exchange market to $ 1.0697.
The possibility of a new increase in ECB interest rates in September is open be greater than 0.25% left its president Christine Lagarde during the press conference, which followed the board meeting.
As she explained, the exact rate of the second interest rate hike will depend on the medium-term inflation forecast. It is noted that after the on-going revision of the forecasts, the one for 2024, raises the inflation target to 2.1%, ie above the target set by the ECB. In case this forecast in September remains the same or worsens, then as Kr. Lagarde, the interest rate increase will exceed 0.25%.
Regarding today’s decisions, which were taken unanimously during the ECB’s meeting in Amsterdam, the Head of the ECB stressed that “they open” a new era in monetary Central Bank policy. As he characteristically said, for a decade monetary policy has been trying to contribute to the increase of inflation, if not to avoid the phenomenon of deflation, while today it is facing an inflationary boom. She attributed the jump in inflation, beyond any forecast, to the sharp rise in energy prices, which have risen by 39% compared to last year. At this point, Ms. Lagarde defended the forecasts made public by the ECB, saying that almost all international organizations have fallen short of their forecasts.
Today we took our latest monetary policy decisions:
EWe will end net purchases under our asset purchase program as of 1 July 2022
IntendWe intend to raise our interest rates by 0.25% in July and expect to increase them again in September
More here https://t.co/DaszhqakGD pic.twitter.com/0CITSD4Nza
– European Central Bank (@ecb) June 9, 2022
More specifically, the ECB estimated in March that inflation this year will reach 5.1% while the forecast released today raised the bar to 6.8%. While for 2024 it predicted a decline within the target set by the ECB, to 1.9% (from 2.1% announced today). Regarding the recovery of the economy, the ECB predicts a slowdown due to the complications it has caused the Russian invasion of Ukraine, but also the rise in energy prices. Thus, the forecast for GDP growth this year is limited to 2.8% (from 3.7% in March), to 2.1% for 2023 (from 2.8% respectively) and to 2.1% for 2024 (from 1.6%).
Summing up, Kr. Lagarde stressed that Russia’s unwarranted aggression against Ukraine is seriously affecting the eurozone economy, with the result that the outlook remains highly uncertain. However, there are conditions for the economy to continue to grow and recover further in the medium term.
The euro fell in the foreign exchange market after the interview of the head of the ECB at $ 1.0697
Bond prices in the eurozone also came under pressure, with the result that the yield of the German 10-year bond is around 1.39%, while The yield on the Greek 10-year bond exceeded 4%, amounting to 4.104%.
Eurosystem staff macroeconomic projections for the euro area (June 2022) https://t.co/OF0Ubjy9tL https://t.co/FxX79aWSgN
– European Central Bank (@ecb) June 9, 2022
