Inflation in Ireland has risen again, running at 8.3 percent in May, the highest level since the 1980s. Eurostat’s new inflation data shows growth in the cost of living here is operating below the EU average, but significantly higher than in France and Malta where the rise in the cost of living in May was 5.8% pc.
Cost escalation is hitting Eastern Europe hardest, with eye-watering rates recorded in Estonia (20.1 pc), Lithuania (18.5 pc) and Latvia (16.8 pc). The rise in inflation has prompted the European Central Bank (ECB) to pencil in an interest rate hike of .25 percentage points in July and September, but the latest hike will trigger calls for a sharper hike in some quarters.
On Friday, Dutch central bank chief Klaas Knott said several half-point hikes in interest rates could be needed if inflation worsens.
Nott, an ECB hawk previously a member of the Governing Council who had pitched the idea of a hike above the normal quarter-point, said he does not expect rates to rise by the first cumulative 200 basis points, even in large pay increases. . at the beginning of 2023.
“Later, we will have to see if this is enough to bring inflation back to 2 percent in the medium to long term,” the head of the Netherlands’ central bank said in a radio interview on Friday. “If that’s not enough, we’ll have to increase the rate further. But it’s impossible to put a percentage on that. I can’t rule out any interest rate percentage.”
Facing record consumer-price growth, which is now above 8%, the ECB plans to raise its deposit rate – currently -0.5% – by a quarter point next month and by a larger amount at the following meeting in September . In addition, it outlines a “continuous” cycle of growth, without specifying their size.
However, raising interest rates would increase household bills across Europe and, more importantly, with potentially destabilizing effects for policymakers, with borrowing for the most indebted euro area governments, especially Italy. Threatened to increase the cost of
As borrowing costs rise for Italy this week, the ECB held an emergency meeting on Wednesday where policymakers agreed to expedite work on an anti-crisis tool that could help the bank face the threat of a debt crisis. to intervene in markets to support countries in the