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ECB’s Makhlouf says it is time for Governing Council to act
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DUBLIN (Reuters) – Irish Central Bank Governor Gabriel Makhlouf on Thursday joined a chorus of European Central Bank policymakers calling for the Governing Council to act to tackle inflation, though not necessarily at the same pace as the U.S. Federal Reserve.
DUBLIN (Reuters) – Irish Central Bank Governor Gabriel Makhlouf on Thursday joined a chorus of European Central Bank policymakers calling for the Governing Council to act to tackle inflation, though not necessarily at the same pace as the U.S. Federal Reserve.
ECB President Christine Lagarde on Thursday finally threw her weight behind a rise in the bank’s benchmark interest rate, amid expectations that it will take action in July.
Most other major central banks have already raised borrowing costs but the ECB, which had fought too low inflation for a decade, is still pumping cash into the financial system via bond purchases.
“We have reached the point where we on the ECB’s Governing Council need to act,” Makhlouf said in a speech in Dublin, according to a transcript published by the Irish Central Bank, describing current inflation rates as “concerning.”
“Our objective is for inflation to be at 2% over the medium term – levels are significantly above that now, and it is time for the Council to move to end net asset purchases under the asset purchase programme next month or in July,” he said.
He did not specify when rates should rise, but said it was “realistic to expect that the first move in the ECB’s interest rates will happen soon after net asset purchases end and that rates are likely to be in positive territory by early next year.”
“The era of negative rates is reaching its conclusion,” he said.
Actions that demonstrate the ECB’s commitment to price stability will be critical to anchor inflation expectations,” he said.
“The balance of advantage has tilted decisively towards the need for further action, albeit not necessarily at a similar pace to that of other central banks that have also changed their stance, such as the Federal Reserve,” he said.
Also on Thursday, fellow ECB policymaker and Slovak central bank governor Peter Kazimir wrote on Twitter that he was “ready to hike in July.”
(Writing by Conor Humphries; Editing by Toby Chopra and Hugh Lawson)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to maintain economic stability.
A central bank is a financial institution that manages a country's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy.
Interest rates are the amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal. They influence economic activity and inflation.
Monetary policy refers to the actions of a central bank to manage the money supply and interest rates to achieve macroeconomic goals such as controlling inflation and ensuring economic growth.
The European Central Bank (ECB) is the central bank for the eurozone, responsible for monetary policy, maintaining price stability, and overseeing the banking system in member countries.
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