Euro Inflation Hits All-Time High, ECB in No Rush to Raise Rates – Bitcoin News

A senior ECB official acknowledged that the ECB is concerned that inflation in the euro zone will exceed its expectations. However, the executive revealed that European monetary authorities are not currently ready to raise interest rates.

Despite euro zone inflation hitting 5%, ECB sees no reason to adjust rates

Annual inflation in the euro zone rose to a record high of 5 percent for the sixth straight month in December, according to preliminary estimates from Trading Economics citing Eurostat. The last time inflation fell was in June, when it fell to 1.9% from 2% in May.

source: trade economics

“We are a little concerned about these figures because they are higher than we originally expected,” commented ECB executive board member Isabelle Schnabel in a recent interview with Süddeutsche Zeitung. The official also recognized concerns among many in Europe about falling real wages and interest income.

Still, Schnabel made it clear that regulators are not yet ready to raise interest rates in the euro zone, citing forecasts that point to a “significant decline” following a surge in inflation caused by the global pandemic. The banker also noted that the ECB should avoid hindering the economic recovery, saying:

In our forecast, inflation will even fall back below our 2% target over the medium term, although we acknowledge that there is considerable uncertainty in the current forecast.

ECB to act if inflation stabilizes above 2%

A representative of the ECB’s executive body also assured that the euro zone central bank “will act swiftly and decisively if we conclude that inflation is likely to stabilize above 2 percent.” A prerequisite for raising rates, she said, is an end to net asset purchases.

Schnabel mentioned Decide The ECB’s Governing Council announced in December that it will gradually reduce interest rates in the coming quarters as a first step in this direction. The program is for products under the Pandemic Emergency Purchase Program that ends in March 2022.

The official dismissed criticism that the ECB’s inaction reflected its fears that the euro debt crisis could flare up again, especially in countries such as Italy, if interest rates rise. “Our actions are entirely guided by our price stabilization mandate. Public borrowing by individual countries has nothing to do with the council’s decision,” she insisted.

The Eurostat data and Schnabel’s comments came as other major economies also saw inflation soar after measures were taken to combat the economic fallout of the Covid-19 pandemic.Data released by the U.S. Department of Labor on Wednesday showed that the consumer price index rose to 7% last month, as Bitcoin.com News report. This is the largest annual increase in the past four years.

Do you think central banks around the world will eventually raise interest rates in response to rising inflation? Share your expectations in the comments section below.

Lubomir Tasev

Lubomir Tassev, a journalist from tech-savvy Eastern Europe, likes Hitchens’ famous quote: “Being a writer is who I am, not what I do.” Beyond crypto, blockchain and fintech, international politics and The economy is two other sources of inspiration.