ECB could hike rates or pause at next meeting: Lagarde

FRANKFURT — The European Central Bank could hike interest rates again or pause at its next meeting and any decision will depend on the latest data, president Christine Lagarde has said.

The central bank for the 20 countries that use the euro lifted borrowing costs for the ninth consecutive time Thursday as it fights stubbornly high inflation.

But in comments after the meeting, Lagarde fueled expectations the ECB may finally pause its historic hiking campaign soon, saying she had an open mind about future decisions.

In an interview with French daily Le Figaro published Sunday, she stressed no decision had yet been made about what the ECB will do at its next meeting on September 14.

"I hear some people say that the final rate hike will take place in September," she said.

"There could be a further hike of the policy rate or perhaps a pause. A pause, whenever it occurs, in September or later, would not necessarily be definitive.

"Inflation must return durably to its target."

Decisions would be based on the latest economic and financial data, she said.

The ECB is due to release its latest forecasts, including for eurozone growth and inflation, at the September meeting.

Inflation has been slowing but still came in at 5.5 percent in June -- well above the ECB's two-percent target.

But there have been growing concerns about the impact of rate hikes after the eurozone slipped into recession around the turn of the year, with the economy shrinking for two straight quarters.

But Lagarde said second-quarter economic growth data for Germany, France and Spain, released Friday, were "quite encouraging".

The French and Spanish economies both grew more than expected. The German economy -- Europe's biggest -- stagnated, despite expectations for a slight rebound.

She also shrugged off criticism coming from leaders of some countries, such as Italy, about the rate increases.

"As a central banker you need to have a thick skin," she said.

"And it's essential to keep sight of the objective of lowering inflation and to be as clear as possible about the tools deployed and the intended results."

Agence France-Presse

Eurozone inflation back to positive; Brexit worries weigh

BRUSSELS, Belgium—Eurozone inflation left negative territory in June, statistics showed Thursday, but economic uncertainty from Brexit sparked concerns that damaging deflation could return to Europe.

The rise in consumer prices is welcome news after months of an unprecedented stimulus program by the European Central Bank to jumpstart sluggish growth and low prices in the eurozone.

Consumer prices in June rose a slight 0.1 percent after slipping 0.1 percent in May, the EU’s Eurostat statistics agency said. This was higher than the zero percent forecast by analysts surveyed by data provider Factset.

“Amid the heightened uncertainties triggered by the Brexit vote, some cheery news for the ECB as the eurozone exited deflation in June,” said Howard Archer, chief economist at IHS Global Insight.

Energy prices again drove consumer prices lower, dropping by 6.5 percent, but this was far less than the negative 8.5 percent a month earlier.

Faced with low prices, the European Central Bank has embarked on a series of unprecedented stimulus programs in a desperate battle to kick-start sluggish growth and inflation in the eurozone.

Slow eurozone growth has seen inflation slide in and out of negative territory, threatening a dangerous downward spiral of falling prices and wages. The ECB aims to get inflation back to two percent or just below, a level it deems healthy for growth.

But analysts warned that knock-on effects from the shock decision by voters in Britain to leave the EU could reverse any progress made towards boosting inflation and growth.

At an EU summit on Tuesday, ECB head Mario Draghi warned leaders that the fallout from Brexit could cost the eurozone up to 0.5 percent in GDP growth over the next three years.

“Uncertainty over the effects of Brexit could add to downward pressure on wage growth and increase firms’ reluctance to raise their prices in the coming months,” said Jennifer McKeown, senior European economist at Capital Economics.

The Frankfurt-based central bank this month took the controversial step of buying corporate bonds, its latest weapon in the fight against deflation that also includes negative interest rates for banks.

Critics in powerful Germany however charge that the ECB is overstepping its mandate by lavishing billions on corporate giants and say it could be distorting markets and creating bubbles.

The ECB has already made unprecedented amounts of ultra-cheap loans available to banks on condition they pass it on as credit for businesses and households.

The ECB has also embarked on a major asset purchase program known as quantitative easing, or QE.

source: business.inquirer.net