Following in the footsteps of other central banks, it has also set out future rate rises
While the European Central Bank (ECB) has moved much more slowly than other central banks, its decision today to end asset purchases, shutting the lid on its quantitative easing (QE) experiment of the last decade is testament to the global direction of travel now. It also stated that rates will rise by 25 bps at its July meeting (although why not get it done and dusted now remains a mystery) and again in September to take it at least out of the negative rate environment Europe has had to deal with since 2014. It noted that growth is slowing with this year’s forecast now expected to show 2.8% growth versus its previous estimate in March of 3.7% - that is quite a wide reassessment downgrade from the ECB. On the flip side, it sees much sharper inflation this year and next. Slowing growth combined with faster inflation could set up the perfect environment for stagflation, which paltry interest rate increases will have little immediate effect on. Damned if it does and damned if it does not – who would want to be a central banker these days?
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