Monetary policy: Schnabel: rate hikes may take longer than usual

DAccording to ECB Director Isabelle Schnabel, the impact of a series of rate hikes by the European Central Bank (ECB) on the economy may be slower than usual. “Given the current labor shortage, the impact of monetary policy can be expected to be weaker than usual,” she told Belgian newspaper De Tijd (Wednesday edition). Schnabel added that fixed-rate borrowing has also become more common, and so it may take longer than before to feel the effects of monetary tightening.

According to ECB President Christine Lagarde, the full effect of a series of rate hikes by the central bank is now beginning to show. The latest analysis by ECB staff indicates that the impact of monetary tightening on the economy and inflation is likely to increase in the coming years, a French woman recently told the European Parliament’s Committee on Economic and Monetary Affairs.

The ECB has raised key interest rates seven times in a row by a total of 3.75 percentage points. At the next meeting on interest rates, to be held June 15 in Frankfurt, economists polled by the Reuters news agency expect a further increase of a quarter percentage point. The deposit rate, which is crucial in the financial market and which banks receive for holding excess funds, will rise from the current 3.25% to 3.50%.

Source: Frantfurter Allgemeine

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