8 September 2022
If you are covering the latest ECB decision, please see the following comment from Hinesh Patel, portfolio manager at Quilter Investors:
“Having at long last joined the rate hike club in July with the first ECB interest rate rise for 11 years, it comes as little surprise that a further increase has been introduced today. A larger rate rise had already been penned in for September, and with the eurozone’s headline annual inflation rate rising to 9.1% last month, this was confirmed in the form of a 75 basis point hike with the promise of more to come.
“However, the ECB governing council’s decision to further increase rates is a sideshow to the increasing risks of sovereign debt sustainability. More important is the disappointing lack of news on measures to be deployed to reduce the risk of another sovereign debt crisis.
“At the margin, increasing policy rates will be a welcome boost for banks and savers who have been financially repressed, yet this cannot solve for the energy crisis exacerbated by Russia’s ongoing aggression on Ukraine.
“Ultimately, Lagarde’s council may be repeating the same mistake as Trichet’s in 2011 by hiking in to rising commodity prices that are outside of monetary policy control.”
