Despite record high inflation, the European Central Bank is still hesitant. In doing so, she risks her biggest trump card: confidence in her ability to act.
“Then we will deal with the subject of interest rates when the time comes.” This answer is from European Central Bank-president Christine Lagarde When asked by a reporter if she has anything more specific to say about potential interest rate increases, this is emblematic of central bank policy. Wait and See is the emblem of Frankfurt’s currency watchdog. Although the round of hilarious inflation is spinning at a faster pace than ever and eurozone inflation hit a new record high of 7.5 per cent in March, there is no change in the central bank’s trajectory.
As decided in March, the bond-buying program will be scaled back by the third quarter, after which there may be a rise in interest rates in the “medium term”, according to Lagarde. Just to be clear, while inflation is currently nearly four times the 2 percent target, the European Central Bank continues to pump billions into the markets every month, at least until July, driving up inflation. Even with a great deal of understanding that central banks have always acted with extreme caution, the following picture cannot be avoided: there is a fire here. And the fire brigade continues to pour oil instead of water.
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