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ECB Raises Interest Rates to Combat Stubborn Inflation

The marginal lending facility, which offers overnight credit to banks, was also increased by a quarter-point to 4.75 per cent…reports Asian Lite News

The European Central Bank (ECB) has raised interest rates to the highest level since the launch of the euro to tackle stubbornly high inflation, despite fears over a slowdown across the single currency bloc, according to a media report.

It marks the 10th consecutive rate rise for the bank, as the ECB warned inflation remained too high even as the impact of previous increases and a weakening outlook for global trade weigh on the eurozone economy, The Guardian reported. 

The latest increase pushes the ECB’s deposit rate, which is paid on commercial bank deposits, from 3.75 per cent to 4 per cent — the highest since the euro was launched in 1999. Its main refinancing operations, which provide the bulk of liquidity to the banking system, was increased from 4.25 per cent to 4.5 per cent, The Guardian reported.

The marginal lending facility, which offers overnight credit to banks, was also increased by a quarter-point to 4.75 per cent.

The decision comes as global investors predict the world’s most powerful central banks are close to the end of the most aggressive rate-hiking cycle in decades after inflation surged after the Covid pandemic and the Russian invasion of Ukraine, The Guardian reported.

The decision comes as global investors predict the world’s most powerful central banks are close to the end of the most aggressive rate-hiking cycle in decades after inflation surged after the Covid pandemic and the Russian invasion of Ukraine.

Economists anticipate one further increase from the Bank of England when its policymakers meet next week, and expect the US Federal Reserve to leave borrowing costs unchanged despite an uptick in inflation last month driven by higher energy costs, The Guardian reported.

ALSO READ-ECB raises key rates by 25 bps

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ECB raises key rates by 25 bps

Inflation in the Eurozone is still significantly high at 6.1 per cent and underlying price growth, which excludes food and energy, is only beginning to slow…reports Asian Lite News

The European Central Bank (ECB) on Thursday raised interest rates for the eighth time in a row and signalled further policy tightening, as it battles record-high inflation.

The ECB raised the key interest rates, the one banks pay to deposit cash at the central bank, by 25 basis points (bps), its highest level since 2001.

The central bank for 20 countries has now pushed up borrowing costs by a combined 4 percentage points in a year, its fastest pace on record, but a peak is now clearly visible and the debate is slowly moving to how long rates will required to be maintained at current levels.

“The Governing Council’s future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2 per cent medium-term target,” the ECB said.

According to ECB, inflation is likely to stay above its 2 per cent limit through 2025 and signaled once again at further rate hikes in the coming months.

Growth in the eurozone is stagnating and inflation has been cooling down for months on the back of lower energy prices and the sharp increase in key interest rates in the ECB’s 25-year history.

On Wednesday, the US Federal Reserve broke its string of 10 consecutive interest rate hikes, sending a powerful signal to investors around the globe that the ongoing tightening cycle across developed economies is nearing an end, but a little more US tightening is still expected.

However, inflation in the Eurozone is still significantly high at 6.1 per cent and underlying price growth, which excludes food and energy, is only beginning to slow.

“Staff have revised up their projections for inflation excluding energy and food, especially for this year and next year, owing to past upward surprises and the implications of the robust labour market for the speed of disinflation,” the ECB said.

ALSO READ-ECB president vows to tame inflation

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ECB president vows to tame inflation

In her speech, Lagarde also praised the euro, describing it as the “engine of integration” of Europe…reports Asian Lite News

The president of the European Central Bank (ECB) has vowed to bring down soaring inflation in the eurozone to its 2 percent target level “in a timely manner.”

This is an “immediate and over-riding priority” for the Bank, Christine Lagarde said at an event held in Frankfurt on Wednesday to celebrate the 25th anniversary of the ECB.

In her speech, Lagarde also praised the euro, describing it as the “engine of integration” of Europe.

The single currency was the “logical answer” to the changes that emerged from the late 1980s, she said, including the expansion of the euro zone from 11 to 20 members. The euro “offered Europeans stability, sovereignty and solidarity”.

Although the single currency was put to test when a debt crisis hit the EU, as well as during Brexit, Lagarde said people were now able to separate institutions from policies.

“They may like or dislike the policies of the ECB, but they mostly no longer question whether being part of the euro area is the right choice,” she said.

Meanwhile, Lagarde pledged to reduce high inflation in the eurozone as the institution that safeguards the euro marked its 25th anniversary.

“For the ECB, our immediate and overriding priority is to bring inflation back down to our two percent medium-term target in a timely manner,” Lagarde told around 200 guests at an event to mark the occasion. And we will do so,” she said, while warning that “there will be more challenges ahead which the ECB will need to address. We must continue to provide stability in a world that is anything but stable”.

The ECB laid out a blue carpet for the birthday party at its imposing steel-and-glass tower in Frankfurt, Germany’s financial capital.

The event featured renditions of music by French composer Claude Debussy and a mango-flavoured cake cut by Lagarde and two of her predecessors, Jean-Claude Trichet and Mario Draghi.

German Chancellor Olaf Scholz was also among the guests.

“Last year we have seen the highest inflation rates since the creation of the euro. The consequences are being felt by citizens all over Europe,” Scholz said.

“It is good to know that when we are celebrating this special occasion here tonight, the ECB is actively fighting inflation.”

Inflation in the eurozone surged to record highs over the past year as Russia’s invasion of Ukraine drove up energy prices, and as the recovery from the Covid pandemic caused widespread supply chain woes.

The closely watched indicator stood at seven percent in April – down from a peak of 10.6 per cent in October but still well above the ECB’s 2 per cent target.

ALSO READ-Inflation expectations ease as BoE considers next rate hike

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ECB hikes interest rates by 50 bps

A President of the European Central Bank (ECB) Christine Lagarde (C) attends a press conference in Frankfurt, Germany, Dec. 15, 2022. (ECB/Handout via Xinhua/IANS)

The inflation outlook, which has been revised substantially higher, has been the main reason behind the ECB’s move…reports Asian Lite News

The European Central Bank (ECB) has raised its key interest rates by 50 basis points (bps) and explicitly committed to further hikes to tame rampant inflation in the eurozone.

The interest rates on the main refinancing operations, the marginal lending facility and the deposit facility will be increased to 2.5 per cent, 2.75 per cent and 2 per cent, respectively, with effect from December 21, Xinhua news agency quoted the bank as saying in a statement.

The inflation outlook, which has been revised substantially higher, has been the main reason behind the ECB’s move.

Interest rates would have to “rise significantly at a steady pace”, the bank said.

After the revision, the Eurosystem staff forecast that inflation in the eurozone would reach 8.4 per cent in 2022, 6.3 per cent in 2023, 3.4 per cent in 2024 and 2.3 per cent in 2025.

Inflation in the eurozone dropped slightly to 10 per cent in November.

Price pressures remain strong across sectors as energy costs stay at high levels, the bank said.

Justifying its decisions, the ECB said that raising rates would reduce inflation by dampening demand over time and guard against the risk of a persistent upward shift in inflation expectations.

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ECB expects economic activity to slow

The euro area economy grew by 0.8 per cent in the second quarter of 2022, Lagarde explained, mainly owing to strong consumer spending on services as the economy reopened…reports Asian Lite News

The European Central Bank (ECB) expects economic activity in Europe to slow down substantially in the coming months, due to skyrocketing prices, decreased spending power and overall uncertainty, ECB President Christine Lagarde said.

Addressing a hearing of the European Parliament’s Economic and Monetary Affairs Committee, Lagarde on Monday added: “We expect to raise interest rates further over the next several meetings, to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.”

“Our future policy rate decisions will continue to be data-dependent and follow a meeting-by-meeting approach,” she said.

The euro area economy grew by 0.8 per cent in the second quarter of 2022, Lagarde explained, mainly owing to strong consumer spending on services as the economy reopened.

However, growth is expected to slow substantially. This is mainly due to high inflation, slower demand for services, a weakening global demand and worsening terms of trade. Falling household and business confidence due to a high level of uncertainty are also contributing factors.

The Russia-Ukraine conflict has “cast a shadow over Europe” with economic consequences, she said.

The “outlook is darkening,” while inflation remains “far too high” and is “likely to stay above our target for an extended period”.

“The risks to the inflation outlook are primarily on the upside, mainly reflecting the possibility of further major disruptions in energy supplies,” the ECB chief added.

“While these risk factors are the same for growth, their effect would be the opposite: they would increase inflation but reduce growth.”

These developments have led to a downward revision of the latest ECB staff projections for economic growth for the remainder of the current year, and throughout 2023. Staff now expect the economy to grow by 3.1 per cent in 2022, by 0.9 per cent in 2023 and 1.9 per cent in 2024.

Lagarde said it is “essential” that “temporary and targeted” fiscal support is used to shield households from the impact of higher prices, as this limits the risk of fueling inflationary pressures.

ALSO READ-ECB to incorporate climate change into monetary policy ops

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ECB to incorporate climate change into monetary policy ops

Regarding risk assessment and management, the bank pledges to “better include climate-related risks”…reports Asian Lite News

The European Central Bank (ECB) on Monday announced measures to incorporate climate change into its monetary policy operations.

By taking climate change considerations into account, the bank aims to incentivize companies and financial institutions in the euro area to reduce carbon emissions.

“With these decisions, we are turning our commitment to fighting climate change into real action,” says ECB President Christine Lagarde.

The ECB promised to prioritize issuers with better climate change performance through the reinvestment of the redemptions of the corporate bonds it bought through its bond-buying programs.

Limitations will be put on collateral assets issued by entities with a high carbon footprint.

The measures also necessitate climate-related disclosures for companies and debtors that use marketable assets and credit claims as collateral under the framework of the Corporate Sustainability Reporting Directive as of 2026.

Regarding risk assessment and management, the bank pledges to “better include climate-related risks”.

The ECB fell short of disclosing details of the measures but revealed that it will start publishing climate-related information on corporate bond holdings regularly as of the first quarter of 2023.

It initiated an array of bond-buying programs as part of its non-standard monetary policy measures in mid-2014.

Although the programs came to an end as of end-June, the ECB will continue to reinvest the maturing securities it bought through the programs. Data from the central bank’s official website show that the total holdings under its Asset Purchase Program stood at 3.25 trillion euros and those under the Public Sector Purchase Program topped 2.58 trillion euros at the end of May

ALSO READ-ECB warns of food inflation effects on eurozone

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ECB hints Ashes could be in doubt

The series is scheduled to start from December 8 and end on January 18. England are due to name a large squad with an England Lions team to be present in Australia while the Ashes are on…reports Asian Lite News.

The England and Wales Cricket Board (ECB) have released a statement on the Ashes tour, saying that they will make a decision over ‘whether the conditions in place are sufficient for the tour to go ahead’ later this week. The Ashes tour to Australia has been in doubt due to the quarantine conditions and players’ families accompanying them for the five-match series.

“Over the weekend we have been talking to England men’s players and management to provide them with the latest information about the proposed arrangements for this winter’s scheduled Ashes tour,” said ECB on Monday.

“We remain in regular and positive dialogue with Cricket Australia over these arrangements as the picture is constantly evolving. With health and wellbeing at the forefront, our focus is to ensure the tour can go ahead with conditions for players and management to perform at their best.

“We will continue talking to our players this week to share the latest information and seek feedback. Later this week the ECB Board will meet to decide whether the conditions in place are sufficient for the Tour to go ahead and enable the selection of a squad befitting a series of this significance.”

The series is scheduled to start from December 8 and end on January 18. England are due to name a large squad with an England Lions team to be present in Australia while the Ashes are on. Last week, England captain Joe Root said he was desperate to be part of the tour, but did not confirm his participation.

Prime Minister Boris Johnson has also stepped in on behalf of his country’s cricketers and had pleaded with his Australian counterpart Scott Morrison in Washington DC last month for the families to be allowed to travel to Australia with the players to lessen the stress caused by staying away from the family during Christmas.

Earlier on Monday, assistant coach Paul Collingwood wrote an Instagram story about the dilemma many in the England team face on travelling without seeing their family members for a long time.

“I love my job and I’m so excited for the winter of cricket ahead but saying goodbye to your daughters for potentially 3 months is not easy, no matter how tough you feel you are. We all make sacrifices in life. Looking forward to meeting up with the team tomorrow because I know we will try to help each other like a family.”

ALSO READ-England call off Pakistan tour in October

READ MORE-England players to skip rest of IPL

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England players to skip rest of IPL

Even as the Indian cricket board hopes to complete remainder of the Indian Premier League (IPL), possibly at an overseas destination, the English board has put its foot down in favour of international cricket, ruling out the possibility of English cricketers playing in the league.

“We’re planning on the involvement of England players in England matches. We’ve got a full FTP schedule. So if those tours to Pakistan and Bangladesh [in September and October] are going ahead, I’d expect the players to be there,” England men’s director of cricket Ashley Giles told British media here.

While the Board of Control for Cricket in India (BCCI) is looking for a window in September — between the home series against India and the T20 World Cup – or after the T20 World Cup ends in November, the England and Wales Cricket Board (ECB) wishes to follow the tight schedule as laid out in the Future Tours Programme (FTP).

England play New Zealand in two Tests on June 2-14 in a series that was hastily arranged and Giles said the IPL players were allowed to skip the Test series as an exception since their IPL contracts were already formalised.

“The New Zealand scenario was very different. Those Test matches were formalised at the end of January, by which time all those contracts and NOCs [no objection certificates] were signed for full involvement in the IPL,” he said further.



“None of us knows what a rearranged IPL looks like at the moment; where it’s going to be or when. But from when we start this summer against New Zealand, our programme is incredibly busy. We’ve got a lot of important, high-profile cricket including the T20 World Cup and the Ashes. And we’re going to have to look after our players.”

England are expected to tour Bangladesh in September immediately after hosing India in a five-Test series and then they travel to Pakistan in mid-October.

They play the T20 World Cup, scheduled to be held in October-November, after that and then travel to Australia for Ashes that begins on December 8.

They then have a limited overs series in West Indies just after Ashes in January and they follow it up with a limited-overs series which means they are tied up till the next IPL.

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