ECB hikes rates to match record high as inflation set to remain 'too high for too long'
Eurozone inflation sat at 5.5% in June, down from 6.1% the month before but still substantially above the ECB’s target of 2%.
Making its ninth consecutive hike of the cycle, the central bank met expectations with the rise as it maintained the fastest tightening pace in its history.
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Eurozone inflation sat at 5.5% in June, down from 6.1% the month before but still substantially above the ECB's target of 2%.
«Inflation continues to decline but is still expected to remain too high for too long,» said the ECB's Governing Council.
Since the ECB's last hike on 15 June, the bank's governing council said that market developments had supported «the expectation that inflation will drop further over the remainder of the year».
However, underlying inflation still «remains high overall», it warned, as core inflation reached 5.5% last month, compared to 5.3% in May.
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Notably, the central bank did not set clear expectations for its September meeting, which Neil Birrell, CIO of Premier Miton Investors, said was «of much more interest».
He explained the September decision will be clearly subject to the two upcoming inflation data releases for July and August, leaving the ECB hesitant to give forward guidance.
He continued: «Whatever they mean for the overall outlook, either way, the ECB will want to retain flexibility. If rates are yet not at the peak, we are not far away, and the conversation may soon move to how long they will stay at the peak.»
Clémence Dachicourt, senior portfolio manager at Morningstar Investment Management, agreed, arguing that recent activity surveys indicated economic slowdown in both manufacturing and services
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