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Global Economy

Inflation out of control? Criticism of the ECB after historic rate hike

In the Handelsblatt, after the European Central Bank's interest rate hike, there is talk of an imminent "crash". The FAZ commentary states that the decision was correct, but came too late.

SPIEGEL even sees a possible "pact with the devil". The experts from Germany are alluding to the fact that the central bank has agreed to buy unlimited bonds from individual countries, such as Italy, if necessary. And the reference to the devil refers to the strengthening of the extreme right after ex-ECB boss Mario Draghi failed to save his governing coalition.

The European Central Bank raised interest rates by 0.5 percent on Thursday in a historic step. The reason for the change of direction after 11 years of low interest rates is the record inflation in the euro zone.

President Christine Lagarde admitted that inflation is much higher than the ECB had projected.

“Inflation remains undesirably high and is expected to remain above our target for some time. Recent data point to a slowdown in growth in the second half of '22 and beyond. At the same time, this slowdown is being cushioned by supportive factors The Governing Council has therefore decided to raise the key ECB interest rates and approved the Transmission Protection Instrument (TPI)."

This instrument was created to protect individual member countries from possible shocks caused by ECB interest rate measures. A problem that has rocked the eurozone in the past.

Lagarde said: "As we continue to normalize monetary policy, the Transmission Protection Instrument will ensure that our monetary policy stance is smoothly transmitted to all euro area countries. The coherence of our monetary policy is a prerequisite for the ECB to fulfill its price stability mandate. "

The ECB's goal is to bring inflation back to 2 percent without plunging the eurozone into recession. It's a delicate balancing act – and further rate hikes in the coming months cannot be ruled out.

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