Columbia Threadneedle: Monetary policy ECB is biting

Columbia Threadneedle: Monetary policy ECB is biting

July 27, 2023

ECB
ECB (07)

David Chappell, Senior Portfolio Manager Fixed Income bij Columbia Threadneedle, responds to today's ECB's intereste rate decision.

'The ECB followed the US Federal Reserve’s lead, and delivered another 25bp rate increase while stressing that any additional adjustments would be data dependent.

Subtle tweaks to the wording of the latest monetary policy statement suggest that rates are at or approaching the level the committee deems ‘sufficiently restrictive’ to set inflation on the path to the 2% medium term target. Whilst the US economy has so far weathered a tightening of financial conditions and the failing of a handful of banks, confounding many with its resilience, the Eurozone has barely remained out of contractionary territory over the last 9 months, and the latest PMIs and credit conditions survey suggest that growth will remain hard to come by, even as unemployment remains historically low. In this respect, the ECB should feel that monetary policy is indeed biting, and that future meetings will see the debate shifting to when to pause, as opposed to how many more hikes are likely required.'

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