Interest rates up? Here’s the ECB’s answer
Christine Lagarde, President of the European Central Bank, suggested the possibility of raising inflation forecasts during the June ECB Governing Council meeting.
“The March forecast, which predicted a price rise of 2,6% this year, will probably be adjusted,” she said on the Italian program “Che Tempo Che Fa” on Sunday.
Lagarde said that since the last forecast the situation has “changed”, likely referring to the growing effects of the prolonged conflict in the Middle East.
Bloomberg says the statement confirms earlier announcements, including those by Alexander Demarco, a member of the ECB Governing Council.
In an interview with the agency, he said that inflation forecasts made shortly after the US and Israel attack on Iran could have been “too optimistic”.
“Inflation rose to 3%, that’s bad news, and the risk that energy prices will remain high for a long time has become certain,” he said, quoted by Bloomberg.
“The good news is that we still see core inflation returning toward 2%, there are not many signs of side effects, and medium‑ and long‑term expectations remain fairly stable,” he added.
The key issue remains the decision on interest rates, which the ECB will announce on June 11.
Lagarde, as Bloomberg reminds, refused to answer whether rates would be raised then.
“The current situation is so uncertain that we must analyze all available data, assess how the economy will develop in the coming quarters, determine whether action is needed, and what impact it will have in the medium term,” she said.
“Our goal is 2% in the medium term,” she added.
Eurozone interest rates, according to forecasts, could be raised by 25 basis points, especially if no peace agreement is reached between the United States and Iran.
“In June we will probably have to raise rates. We must make it clear that we are committed to achieving our medium‑term goal. It’s about maintaining credibility – we can’t give the impression that we’re falling behind the situation,” Demarco said.
“At the moment I don’t see the need to go far. I just need to review the forecasts and what they say about the medium‑term outlook. That may tell us whether one hike is enough, or we may need two, or even more,” he added.
Source: Trading Economics.
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Euro and dollar rates on Monday, May 25
The euro to zloty rate on Monday, May 25 is at 4,23 PLN.
Chart. Euro to zloty (EUR/PLN)
Source: Trading Economics.
The euro to dollar rate reaches 1,16 USD.
Chart. Euro to dollar (EUR/USD)
Source: Trading Economics.
Also read: Dollar before a chance to break out? Expert: “Capital will flow back to USD”
See also: Dollar before a “nervous and dynamic” move, euro waiting for a fall? Expert issued a forecast for USD/PLN and EUR/USD
Source: Bloomberg.
