ECB Wants to Avoid Making ‘Small of Big Steps’ on Interet Rates

ECB Wants to Avoid Making 'Small of Big Steps' on Interet Rates

The European Central Bank (ECB) headquarters building is pictured ahead of the start of the press conference on the eurozone’s monetary policy in Frankfurt am Main, western Germany on February 2, 2023ECB Wants to Avoid Making 'Small of Big Steps' on Interet RatesInternationalIndiaAfricaOleg BurunovThe ECB previously raised its interest rates by 0.5 percentage points amid concerns that higher borrowing costs could set off a domino effect across the entire banking sector. Yannis Stournaras, a member of the European Central Bank (ECB)’s Governing Council, has warned that the lender’s policymakers should be cautious and avoid making big or small moves regarding a decision on the interest rates.In an interview with Greek media, he stressed that any such decision should be based on data “exactly because we have reached close to the ceiling, close to the maximum increase.”

"Close — I didn’t say we have reached it yet, but we are converging toward it," Stournaras said.

The remarks followed the ECB deciding on the 0.5 percentage point rise in its interest rates last month, which pushed the bank’s main rate up to 3.5%. This came despite concerns soaring interest rates could cause a domino effect across a banking sector across the eurozone.ECB officials explained that inflation will most likely remain high “for too long”, which they said prompts the bank to go ahead with its planned run of rate increases.Echoing them was Olli Rehn, the governor of the Bank of Finland and a member of the ECB’s board, who said that “inflation is still by far too high,” urging the ECB to “carry on and act consistently.”In a brief explainer published on the ECB’s website last year, the bank, in particular, underscored that a rise in interest rates, which ultimately are the cost of borrowing money, helps the lender stem inflation.”We are the central bank for the euro, and it is our mandate to keep prices stable. When prices in our economy are rising too fast – that is, when inflation is too high – increasing interest rates helps us bring inflation back down to our 2% target over the medium term,” according to the ECB.As for the ECB’s move to raise interest rates, it came after the Director of the International Monetary Fund’s (IMF) European Department Alfred Kammer warned last week that Europe is experiencing challenges related to persistent inflation, slow economic recovery and financial stability across the continent.He warned that inflation remains “stubbornly high” and continues to be in double digits in most emerging European economies and some advanced economies.

Flop of EU’s Anti-Russian Sanctions

As part of the post-COVID pandemic global economic recession, the EU was forced to grapple with a massive energy crisis and surging inflation, the rate at which prices for goods and services increase.The situation further deteriorated after Western countries slapped “severe” sanctions on Russia over its special military operation in Ukraine, which led to disruptions in supply chains and resulted in a spike in energy prices worldwide.ECB Wants to Avoid Making 'Small of Big Steps' on Interet RatesAnalysisHow Russia Beat Western Sanctions and Remained Strong Amid Global Economic Storm23 March, 17:19 GMTRussian President Vladimir Putin recently underscored that his country has bolstered its economic sovereignty since 2022 and did not collapse as Russia’s “enemy” expected.

"Despite certain costs, I think that last year was only beneficial, given that we have become much more sovereign and independent in the economy," he pointed out. Putin earlier emphasized that the anti-Russian sanctions had backfired on those who imposed them.

With the EU’s 10 sanction packages against Russia already in place, the bloc’s officials have meanwhile told UK media that they have no plans to ramp up the sanctions pressure any further, voicing concerns that doing so could affect sectors which European countries “can’t live without,” such as imports of fuel for nuclear power plants, and precious metals.


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