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Panetta: An ECB rate hike above zero will depend on the data

The European Central Bank is on track to raise interest rates from negative territory, but any increase beyond that will depend on the new data as the outlook is uncertain, stressed the member of the board. of the ECB, Fabio Panetta.

The ECB is expected to raise interest rates for the first time in a decade in July, with inflation at a new high and as it unveiled a new bond-buying scheme aimed at curbing borrowing costs for the most over-indebted members, such as Italy .

Panetta, the ECB member and governor of Italy’s central bank, had backed the plan to raise interest rates by 25 basis points on July 21, but stopped short of repeating that a September hike might be higher, instead saying any move it should be gradual.

We are ending policies that have tried to prevent deflationary dynamics, such as net asset purchases and negative interest rates. But beyond that, further adjustments to our monetary policy stance will depend on the evolution of the outlook for inflation and the economy,” the Italian central banker added.

He stressed that the rise in inflation did not reflect excess demand, as consumption and investment remained below pre-pandemic levels, wages rose at a modest pace and less than prices, and the war in Ukraine weighed on confidence.

Some of his counterparts were open to raising the ECB deposit rate (to 0.5%) now, back to zero as early as July.

Source: Capital

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