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Will the European Central Bank raise the interest rate for the tenth time in a row?



The cost of living in Slovenia and Germany rose by more than 6 percent on an annual basis in August

For the first time since last July, when the European Central Bank started raising key interest rates, economists and stock market analysts cannot predict whether the ECB Council will raise interest rates today for the tenth time in a row or leave them at the level of four percent.

Obviously, central bank governors in the Eurozone have different views and expectations. Rarely are expectations before the meeting of the European Central Bank in Frankfurt as different as today. The president of the ECB already said after the last session at the end of July that both are possible, both a renewed increase in key interest rates by 25 basis points and a pause and wait. Christine Lagarde. “We may raise the interest rate further or we may pause. It is not decided what we will do in September. But we are very firmly entrenched in our determination to break the back of inflation.”

The cost of living in the euro area rose by 5.3 percent in August compared to the same period last year, and in Slovenia and Germany by more than 6 percent. Core inflation, i.e. prices excluding energy and food, remains high. This year, average wages have increased across Europe. Energy prices are also rising again. These are the reasons why the ECB could raise interest rates for the tenth time in a row today. Some are of the opinion that he should not miss this window of time.

On the other hand, the data on economic growth are a real disappointment, UMAR predicts 1.6% growth for Slovenia this year, industrial production is in decline, global demand is fragile. The Munich institute IFO reports that in August as many as a fifth of German construction companies canceled projects – and this at a time when there is a severe shortage of new housing. Current interest rates are already too high to invest in their construction.

These are the reasons why the ECB could announce today that it will not act again, but wait for the effect of the previous hikes. Economists are convinced that there will be effects. They will show up with a delay. ECB Chief Economist Philip Lane expects inflation to moderate at the end of autumn.

Source: Rtvslo

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