ECB flexible: Interest rate decisions are made on a "meeting-by-meeting" basis

The ECB in Frankfurt: Interest rate decisions are made flexibly with a view to inflation developments. © Boris Roessler/dpa

The ECB's chief economist does not reveal the future course of the central bank. The monetary authorities will monitor inflation developments and, if necessary, raise interest rates further.

Berlin/Frankfurt - ECB Chief Economist Philip Lane is keeping a low profile about the future interest rate course of the European Central Bank (ECB). In times of uncertainty, it is important to orient oneself from "session to meeting", said Lane on Tuesday in Berlin at an event organised by the Jacques Delors Centre. The monetary authorities would have to carefully weigh up downside and upside risks. "We are dependent on the data," emphasized the Irishman. No interest rate path is mapped out. The aim is to bring interest rates to a certain level and then keep them there for as long as necessary.

ECB may have to raise interest rates further

In the view of Governing Council member Peter Kazimir, the ECB may have to tighten monetary policy for a longer period of time than currently assumed. "Based on today's data, we will have to raise interest rates longer than expected," the head of Slovakia's central bank explained in a blog post, adding: "Our September forecast will be the earliest date to answer how effective our measures are and whether inflation is moving towards the target." The development of core inflation, the continued build-up of wage pressures and high profit margins required vigilance.

The ECB raised interest rates by 0.25 percentage points last week. The deposit rate that banks receive for parking excess funds in the financial markets is currently 3.25 percent. In the money market, the ECB is expected to raise interest rates by another 40 basis points. An increase of 0.25 percentage points in June is part of the scenario. Savers can also benefit from the higher key interest rate.

Fundamental inflation is stubbornly stubborn

For the ECB, the fight against the ongoing surge in prices is protracted: Inflation in the euro area is still well above the central bank's target of two percent. In April, the inflation rate even rose slightly to 7.0 percent, after falling to 6.9 percent in March from 8.5 percent in February.

The much-watched core rate, which excludes volatile energy and commodity prices, also fell only minimally to 5.6 percent in April from 5.7 percent in March. This is a concern for many monetary watchdogs, because it could be a sign that this so-called underlying inflation will prove to be more persistent than expected. (Reuters/dpa/rowa)