European Central Bank (ECB) officials Mario Centeno and Luis de Guindos have indicated that the full effects of recent interest-rate hikes have yet to be felt in the economy. Despite an inflation rate of 4.3%, they are aiming for a target of 2%, as revealed in a meeting held in Lisbon on Wednesday.
The pair also proposed to maintain the current 4% deposit rate, in an attempt to prevent further increases in borrowing costs. This approach aligns with the ECB’s broader strategy of managing inflation and maintaining economic stability.
Christine Lagarde, the President of the ECB, supported this strategy, highlighting a core measure of inflation at 4.5%. She emphasized the necessity for “restrictive levels” in borrowing costs to keep inflation under control.
The ECB’s stance indicates its determination to manage inflation while ensuring that borrowing costs do not escalate, potentially stifling economic activity. The strategy is seen as a careful balancing act in managing economic growth while keeping inflation within manageable limits.
This report was compiled with contributions from reporters Joao Lima and Henrique Almeida.
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