ECB could hike rates or pause at next meeting: Lagarde

    • The ECB is due to release its latest forecasts, including for eurozone growth and inflation, at the September meeting.
    • The ECB is due to release its latest forecasts, including for eurozone growth and inflation, at the September meeting. PHOTO: AFP
    Published Mon, Jul 31, 2023 · 07:41 AM

    THE European Central Bank (ECB) could hike interest rates again or pause at its next meeting and any decision will depend on the latest data, president Christine Lagarde has said.

    The central bank for the 20 countries that use the euro lifted borrowing costs for the ninth consecutive time on Thursday (Jul 27) as it fights stubbornly high inflation.

    But in comments after the meeting, Lagarde fuelled expectations the ECB may finally pause its historic hiking campaign soon, saying she had an open mind about future decisions.

    In an interview with the French daily Le Figaro published on Sunday, she stressed no decision had yet been made about what the ECB will do at its next meeting on Sep 14.

    “I hear some people say that the final rate hike will take place in September,” she said.

    “There could be a further hike of the policy rate or perhaps a pause. A pause, whenever it occurs, in September or later, would not necessarily be definitive.

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    “Inflation must return durably to its target.”

    Decisions would be based on the latest economic and financial data, she said.

    The ECB is due to release its latest forecasts, including for eurozone growth and inflation, at the September meeting.

    Inflation has been slowing but still came in at 5.5 per cent in June – well above the ECB’s 2 per cent target.

    But there have been growing concerns about the impact of rate hikes after the eurozone slipped into recession around the turn of the year, with the economy shrinking for two straight quarters.

    But Lagarde said second-quarter economic growth data for Germany, France and Spain, released on Friday, were “quite encouraging”.

    The French and Spanish economies both grew more than expected. The German economy – Europe’s biggest – stagnated, despite expectations for a slight rebound.

    She also shrugged off criticism coming from leaders of some countries, like Italy, about the rate increases.

    “As a central banker you need to have a thick skin,” she said.

    “And it’s essential to keep sight of the objective of lowering inflation and to be as clear as possible about the tools deployed and the intended results.” AFP

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