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The European Central Bank is not ruling out more drastic interest rate hikes than the 25 basis points agreed at its last meeting in June, according to minutes published on Thursday. news online
The first rise in 11 years, set to be formally signed off at the ECB’s next meeting on July 21, is part of a planned gradual approach to monetary policy, the minutes said.
However, “gradualism should not necessarily be interpreted as slow action in small steps”, the notes said, and should not be “seen as precluding interest rate steps in excess of 25 basis points”.
The ECB’s June meeting marked a turning point in the Frankfurt-based bank’s accommodative policy of recent years, with further rate increases expected in the coming months to combat record inflation.
The move had been hotly anticipated after several other central banks hiked their rates.
“A number of members” expressed an initial preference in June for keeping the door open to agreeing a larger hike at the bank’s July meeting, according to the minutes.
These so-called hawks argued that the central bank should “retain the discretion to adjust the size of the interest rate move in case new information available for the July meeting materially affected the medium-term inflation outlook”.
The increase of 25 basis points was seen as a “proportionate first step”, especially since the first rate hike in 11 years would be “a step that needed to be prepared and explained carefully”.
Carsten Brzeski, an analyst for the ING bank, said the message of the minutes was that “the door to a rate hike bigger than 25 basis points at the upcoming meeting on 21 July is still open”.
“With the risk of a looming recession in the eurozone and a cooling US economy, some hawks … could still push for a rate hike of 50 basis points in July,” he said.
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