Yesterday, the European Central Bank announced that it would increase the interest rate by 25 basis points, bringing it to 3.75 percent. This means that monetary policy makers in the eurozone will keep doing what they’ve been doing in order to stop inflation and keep things from getting out of control.
Christine Lagarde, the President of the European Central Bank, told the media at a press conference that inflation is still high and is likely to stay high for a long time, and that it will take a long time to get to the target rate.
In the same manner, Lagarde mentioned that she doesn’t expect to change the current policy anytime soon because the European Central Bank still needs to do a lot to stop inflation.
However, Lagarde said that the banking system is strong and flexible, which has been seen in the eurozone. It is certain that the European Central Bank will work to follow up on the Credit Suisse crisis and the troubled American banks, and Lagarde repeated what she said at the last meeting of the bank to emphasize that the ECB will support the banking system in the eurozone.
Lagarde thinks that the region’s unemployment rate will be worse than what it was during the Corona pandemic. The European Central Bank is in responsible for keeping prices stable, since the prices of basic foods are high and the service sector is growing quickly.
From what bank officials have said, we know that the biggest problems facing European monetary policy right now are inflation and keeping prices stable in the face of a banking crisis that doesn’t seem to be ending any time soon. The banking system also needs to win back the trust of depositors and European citizens.
The Eurostat report from yesterday indicated that the producer price index went down in March, and Standard & Poor’s Global said that the purchasing managers’ index in the services sector went down in the euro zone for the month of April. In the currency market, the euro’s value against the US dollar has reached its highest level in a year. At the moment, the euro-dollar pair is worth 1.1027 dollars.
