ECB interest rate hike: a step too far?
The ECB has raised the key interest rate again by 0.25 percentage points to 4.25 percent. The goal of this ninth increase within a year is to reduce inflation in the Eurozone — which currently stands at 5.5 percent — to 2 percent. Commentators voice understanding for the move but also concern about a recession.
Time to give borrowers a break
The Irish Times warns of the consequences of further interest rate hikes:
“A concern for the ECB will be that it has moved too far, too fast, unnecessarily suppressing economic growth and helping to drive the euro zone economy into a recession. ...There is surely a strong case now for the ECB to wait and see the full impact of the interest rate increases announced so far. A significant burden has already been placed on homebuyers and growth in many euro economies is weak. It is time to give borrowers a break.”
Bad for wallets but good for the future
The ECB chief is making the right decisions, says ABC:
“Christine Lagarde’s message was that the interest rate hike was having an effect, but that the crisis could not be considered solved. ... Inflation, particularly core inflation, remains high, and in countries like Germany it has not been sufficiently controlled, so a rise in the price of money to 5 percent or even higher cannot be ruled out. This is not good news for people’s wallets but it remains the only viable recipe to prevent inflation from spiralling further out of control.”
We are lagging behind
Le Temps complains of a lack of foresight:
“The tone has changed. In the coming weeks and months, as we observe the potential damage from the slowdown that central banks have inflicted on their economies, doubts will gain traction. Have they gone too far even as growth was plummeting so dangerously? This question is nothing new, but only now do we dare ask it. Because, as is almost always the case in matters of economics and finance, we are lagging behind reality.”
Good medicine tastes bitter
Economically speaking, the ECB’s policy of increasing interest rates is the right approach, La Stampa believes:
“A bitter medicine for sure, but one whose effectiveness is now becoming apparent, while the side effects are anything but dreadful. ... [With the interest rate hikes in the spring] it was not so much the business community that voiced protests against Frankfurt but the politicians who feared that higher interest on national debt would leave them with too little money to spend; they feared the end of the ‘cheap money’ that was the right choice in the years of the pandemic.”
