According to Lin, the ECB will cause pain by raising interest rates until next year

By Padric Halpin and Conor Humphreys

WexfordThe bank’s chief economist, Philip Lane, said on Saturday that the European Central Bank could raise interest rates until next year, hurting consumers as it tries to curb demand.

As inflation approaches double digits, the European Central Bank It raised rates twice in July and September, promising more action as it moves even the long-term price growth forecast above its 2% target.

“We think this will weaken demand, and we’re not going to pretend it isn’t painful,” Lynn said. “Demand is now a source of pressure on inflation, and it wasn’t as much six or nine months ago as it is now.”

Deposit rate European Central Bankfrom 0.75%, is still too low to continue to stimulate the economy, so the work of European Central Bank Lin added that it is not over yet.

Most economists estimate that the neutral rate, which has European Central Bank It does not stimulate and does not slow down growth, it is between 1.5% and 2%. However, markets are seeing the top of the price cycle higher and investors expect rates to be just over 2.5% in the spring.

Lin has been arguing for months that the current inflation is mainly due to the shock caused by higher energy prices.

Monetary policy is largely powerless against these supply shocks, so European Central Bank It was one of the last major central banks to raise interest rates. However, price growth has widened and is starting to seep into all aspects of life.

Although Lane said rates may continue to rise at each of the remaining meetings this year and early next year as well, the European Central Bank He keeps an open mind about where to stop and will decide what to do with each encounter.

Lane added that the eurozone economy is likely to slow during the winter months and a recession cannot be ruled out, given high energy prices and a shortage of natural gas.

“If we think our base case is barely growth, you can’t rule out a technical recession, which would mean a mild recession,” he said separately in an Irish radio interview. RTE.