Central banks around the globe have stepped up interest rate hikes to combat inflation, which is at its highest in decades.
The ECB raised interest rates sharply to control the “flame” of inflation
Yesterday (September 8), at the end of its policy meeting, the European Central Bank (ECB) raised the key interest rates of the euro by 0.75 percentage points. This is an unprecedented increase since the Euro was officially put into circulation, in the context that inflation in the Eurozone is at a record high. In her speech after the meeting, ECB President Christine Lagarde also reaffirmed her determination to curb inflation.
Accordingly, European Central Bank President Christine Lagarde reiterated that the current inflation situation is the reason for the unprecedented step of the ECB.
“We unanimously made a decision today and may continue to raise interest rates further because inflation is too high and prolonged. Food price inflation reached 10.6% in August due to the impact from energy prices and trade disruptions,” explained Christine Lagarde, President of the European Central Bank (ECB).
While insisting this decision was necessary, Lagarde also said the ECB would carefully consider the move in the next meetings.
“We’re not saying 75 basis points will be a permanent increase. We’ll be evaluating the data on a meeting-by-meeting basis, making the necessary changes to bring inflation back to the target threshold,” said Christine Lagarde. in the medium term”.
The Fed continues to commit to raising interest rates
The above move of the ECB is a remarkable move in the wave of strong interest rate hikes by major central banks in the past two months. Just one day ago, the Bank of Canada also raised interest rates by 0.75 percentage points. At the beginning of the month was an increase of 0.5 percentage points by the Bank of England (BOE).
The most notable among the major central banks is the Fed, which raised interest rates by 0.75 percentage points twice in a row. In his latest remarks, US Federal Reserve Chairman Jerome Powell also caused “turbulence” for the market, when he said the agency will not slow down its momentum.
“The Fed is primarily responsible for stabilizing prices, which currently is keeping inflation at 2%. The longer inflation stays high, the more risky it is and history doesn’t favor monetary easing back too soon. . My colleagues and I are fully committed to this goal until it is completed, regardless of external pressure,” said Chairman Jerome Powell.
The recently released Gray Book of the US also shows that the US economic situation is “supporting” the FED to continue raising interest rates strongly in the near future.
Currently, according to the market’s assessment, it is more than 70% likely that the FED will continue to raise interest rates by 0.75 percentage points in the upcoming meeting.