Brussels – Following the latest rise in interest rates decided at the September meeting, the European Central Bank may be considering a pause, possibly a prolonged one. This is less a matter of speculation than a necessity to safeguard the eurozone economy. The reason is that, as the ECB’s Executive Board concludes, “a further rise in long-term interest rates could adversely affect growth.“ This is probably one of the key passages in the minutes of the meeting of 10 September, when interest rates were raised.
Among the many factors and various indicators discussed at the meeting, the ECB ultimately appears to have taken into account the impact of monetary policy decisions on the overall performance of the eurozone. The stated objective of maintaining price stability and combating rising inflation now appears to clash with the need to avoid exacerbating the situation. With the ECB leaning towards a pause to avert adverse effects on businesses, households and investors, it is now up to national governments to take action.
“Structural reform remained necessary to support higher potential growth,” according to the position expressed by the members of the ECB’s Governing Council. In this regard, general concern has been expressed about “the continued weak momentum of reform efforts” and “the time lags involved,” which are seen as counterproductive factors, preventing potential reforms from being regarded as “an upside risk factor.”
On the subject of reforms, in this renewed call to speed up political action, the ECB’s Governing Council urges that public finances be kept in order. According to the minutes of the September meeting, “it was noted that the recent increase in public spending and the rise in long-term government bond yields could add to vulnerabilities over time.” Consequently, “it is important to maintain sound public finances.” This message appears to contrast with Italy’s call for greater flexibility on spending.
