ECB sees no reason to raise interest rates despite eurozone’s inflation hitting a record high of 5%.
The European Central Bank is concerned over inflation in the euro area rising beyond its own expectations, a high-ranking ECB official has admitted. However, Europe’s monetary authority is not prepared to raise interest rates at this point in time, the executive unveiled.
Nevertheless, Schnabel made it clear the regulator is not ready to raise interest rates in the eurozone for now, citing forecasts indicating that the inflation spike caused by the global pandemic will be followed by a “marked decline.” The banker also pointed out that the ECB should avoid choking off the economic recovery and stated:
In our projections, medium-term inflation will even fall back below our target of 2%, even though we acknowledge that the projections are now subject to great uncertainty.The representative of the ECB executive body also assured that the euro area’s central bank “will act quickly and decisively if we conclude that inflation may settle above 2%.” She remarked that a precondition for lifting rates up is to end net asset purchases.
The official dismissed criticism that inaction on the part of the ECB reflects its fears that the euro debt crisis might flare up again, especially in countries like Italy, if interest rates are raised. “Our actions are guided solely by our price stability mandate. Public borrowing by individual countries has no bearing on the Governing Council’s decisions,” she insisted.
Eurostat’s data and Schnabel’s comments come as other major economies are also registering surging inflation after measures to deal with the economic fallout of the Covid-19 epidemic. Numbers published by the U.S. Labor Department on Wednesday showed that the consumer price index rose to 7% last month, as Bitcoin.com News
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