ECB’s late rate hike
PremiumWhile the ECB’s performance on inflation control has lately been poor, an irony given its early years as a hawk, analysts must cut it some slack for the complexity of its challenges
Inflation is a global scare that caught too many central banks behind the curve. The latest hoping to play catch up at this late stage is the European Central Bank (ECB), which on Thursday raised its benchmark policy rate by 50 basis points, twice as much as it said it would in its last guidance. Clearly, general prices in the Eurozone are behaving worse than it anticipated, though uncertainty wrought by the Ukraine war should have warned it of today’s near-double-digit inflation. As the ECB is unique in that it straddles many countries, it also has a wider responsibility of assuring EU member states equitable financial conditions to the extent it can. To that end, it also unveiled bond buybacks to keep the borrowing costs of more indebted nations in check. While the ECB’s performance on inflation control has lately been poor, an irony given its early years as a hawk, analysts must cut it some slack for the complexity of its challenges. It runs the monetary policy for multiple economies with varied fiscal outlays that sometimes pull in different directions. Yet, it has made a success of the EU’s common currency project. It will be a pity if failure on price stability hurts its credibility.
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