Cliff Taylor: However, the European Central BanK has left itself wriggle room in case in needs to raise them once more
The argument to stay put was based on the weakening state of the euro zone economy, with all the main forecasters, including the ECB itself, cutting their growth forecasts amid signs of manufacturing weakness, a tailing off of growth in services and a sharp fall in credit driven by higher rates. ECB forecasters expect euro zone growth of just 0.7 per cent this year and 1 per cent in 2024.
The trade-off, however, was a concession in the ECB statement that interest rates have now reached a level that, “maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.” There is an out, in other words, but for now this looks like it in terms of interest rate hikes. It will be interesting to see what spin is put on this by the various central bank governors in the days ahead.
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