Unusually, there has been no clear signal from the ECB’s governing council on its intentions
Considerable attention will fall on Christine Lagarde's words on Thursday as interest rate-watchers try to discern where things might go next. Photograph: Ronald Wittek/EPAThe intentions of the European Central Bank have generally been clearly flagged ahead of recent meetings of its governing council. Nobody has beens left in any doubt that interest rates would rise, even if in some cases the scale of the rise was uncertain. But this time it’s different.
Reuters has reported that the ECB’s new inflation forecast – being presented to its council on Wednesday – predicts that the rate will average above 3 per cent next year, which is higher than expected. This is likely to be used by those arguing for another increase, with higher rates used to combat price growth.
The dilemma for the ECB is that it is possible to make an argument either for increasing or staying put. Inflation, at 5.3 per cent in August, remains well above the ECB’s 2 per cent target level and recent increases in oil prices are a concern. Having been late to the party, increasing rates after other major central banks, the ECB will not want to be seen to stop too early. And so, another increase is possible.
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