ECB: Positive attitude towards interest rate hikes shows significant results
2023-06-19
■ In June, the ECB Council decided to increase interest rates by 25bps, which in fact foreshadowed the implementation of interest rate hikes by the Council in July.
■ Due to the remarks of European Central Bank President Lagarde, it has become easier for financial markets to raise policy interest rates.
On June 15th, the European Central Bank (ECB) raised its main policy interest rates by 25bps each, and the deposit rate reached 3.50%. Although the increase in interest rates remains the same as in May last time, the increase in interest rates itself has been held for 8 consecutive meetings. Unlike the Bank of Canada (BOC), Reserve Bank of Australia (RBA), and the Federal Reserve of the United States (Fed), which once stopped raising interest rates, the ECB's proactive attitude towards raising interest rates has left a prominent impression. In the short-term financial market, the Board of Directors raised the deposit interest rate of the Central Bank to 4.00% in September, with a margin of over 50%.
It can be said that a period of heightened vigilance towards the underlying inflation rate has brought the ECB's positive attitude towards interest rate hikes to the forefront. That's (1) the economic forecast of the ECB staff updated this time, (2) the press conference of the President Lagarde of ECB, with a fragmented feeling.
(1) The price estimates for the years 2023 to 2025 are all revised upwards. Of particular concern is the price estimate for 2025. In the last March, the year-on-year increase was 2.1%. If the ECB made financial markets aware of the recent interest rate cut, it would be considered a downward adjustment at least until the price target level (a year-on-year increase of 2.0%). However, due to a slight increase of 2.2%, the ECB's early observation of interest rate cuts was eliminated. The direct performance was further confirmed in (2). ECB President Lagarde stated that he is not satisfied with the price outlook for 2025, has not discussed suspending interest rate hikes, and has expressed a positive attitude towards interest rate hikes in July.
As for the basic inflation rate, the President Lagarde of the ECB currently believes that the unit labor cost has been affected. In the financial market, the January-March Eurozone salary increase, scheduled for today (June 16th), confirms one end of the trend. In the October-December quarter of last year, it recorded the largest growth rate in the past 10 years (a year-on-year increase of 5.1%). With further acceleration of this growth rate, it seems that it will lead to higher interest rates in the eurozone.
From this point of view, the President Lagarde of the ECB said this time that "the terminal exchange rate will not be commented", presumably for the purpose of ensuring the freedom of policy not long ago. The Council's de facto interest rate hike forecast in July means at least a terminal exchange rate (the final point of interest rate hikes) of 3.75% or more. Future wage and price trends, speeches by ECB officials, and observations of ECB policy interest rate hikes in the financial market have become easier.
■ Due to the remarks of European Central Bank President Lagarde, it has become easier for financial markets to raise policy interest rates.
On June 15th, the European Central Bank (ECB) raised its main policy interest rates by 25bps each, and the deposit rate reached 3.50%. Although the increase in interest rates remains the same as in May last time, the increase in interest rates itself has been held for 8 consecutive meetings. Unlike the Bank of Canada (BOC), Reserve Bank of Australia (RBA), and the Federal Reserve of the United States (Fed), which once stopped raising interest rates, the ECB's proactive attitude towards raising interest rates has left a prominent impression. In the short-term financial market, the Board of Directors raised the deposit interest rate of the Central Bank to 4.00% in September, with a margin of over 50%.
It can be said that a period of heightened vigilance towards the underlying inflation rate has brought the ECB's positive attitude towards interest rate hikes to the forefront. That's (1) the economic forecast of the ECB staff updated this time, (2) the press conference of the President Lagarde of ECB, with a fragmented feeling.
(1) The price estimates for the years 2023 to 2025 are all revised upwards. Of particular concern is the price estimate for 2025. In the last March, the year-on-year increase was 2.1%. If the ECB made financial markets aware of the recent interest rate cut, it would be considered a downward adjustment at least until the price target level (a year-on-year increase of 2.0%). However, due to a slight increase of 2.2%, the ECB's early observation of interest rate cuts was eliminated. The direct performance was further confirmed in (2). ECB President Lagarde stated that he is not satisfied with the price outlook for 2025, has not discussed suspending interest rate hikes, and has expressed a positive attitude towards interest rate hikes in July.
As for the basic inflation rate, the President Lagarde of the ECB currently believes that the unit labor cost has been affected. In the financial market, the January-March Eurozone salary increase, scheduled for today (June 16th), confirms one end of the trend. In the October-December quarter of last year, it recorded the largest growth rate in the past 10 years (a year-on-year increase of 5.1%). With further acceleration of this growth rate, it seems that it will lead to higher interest rates in the eurozone.
From this point of view, the President Lagarde of the ECB said this time that "the terminal exchange rate will not be commented", presumably for the purpose of ensuring the freedom of policy not long ago. The Council's de facto interest rate hike forecast in July means at least a terminal exchange rate (the final point of interest rate hikes) of 3.75% or more. Future wage and price trends, speeches by ECB officials, and observations of ECB policy interest rate hikes in the financial market have become easier.