The next steps are known. At the June meeting in Amsterdam, the purchase of QE2 securities will also be terminated. The interest rate will be raised for the first time in July, presumably by 0.25 percentage point. In September, with a second increase, the official cost of cash credit will return to zero, from the current -50%.
towards the neutral level
The next steps will depend on the data received, but the target – at least … – the neutral level of rates, between 1% and 2% as directed by the Governor of the Bank of France Francois Villeroy de Gallo. It’s not being ruled out – at least according to the rumors you’ve been collecting financial times – That a purchase program aimed at reducing differences will be launched, in the event that they are subjected to “pressure”.
Christine Lagarde’s blog
European Central Bank President Christine Lagarde has used an unusual tool, the ECB Blog – in the absence of a temporary press conference between April and June – to set the course for monetary policy rates. The time was right. After the April meeting, the situation changed and it was necessary to give some certainty to economic operators.
At the moment, price increases constitute complete inflation: a general increase in prices, not just an acceleration in the index driven by some particularly “heavy” goods, such as energy and food. In April, 75% of the goods included in the Eurostat index – the index from Lagarde itself – posted increases above the target of 2%.
The Leap in Wage Negotiation
Market expectations may be relatively under control, but something is worrying central banks: In March – the quarterly survey – negotiated wages increased 2.82%, an acceleration from 1.58% in December. It is the highest level since March 2009 and could be the first major sign of Effects of the second round: Expectations that turn into tangible facts. If so, the European Central Bank would have an obligation to step in: all companies that have Pricing power They can pass these cost increases on to consumers, fueling new inflation.
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