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Opinion
Marcus Ashworth

ECB Delay Presages Bigger Rate Increases in Coming Months

With euro-area inflation surging, policy makers risk falling even further behind the curve.

A halt to negative rates is in sight.

A halt to negative rates is in sight.

Photographer: Alex Kraus/Bloomberg

A new era is about to dawn. The euro area’s monetary authorities are finally set to become proactive in tackling soaring consumer prices — just not quite yet. The European Central Bank resisted the temptation to start its rate-hiking cycle at Thursday’s governing council meeting. But stalling until the July 21 gathering makes it more likely that once the first quarter-point increase is out of the way, September’s decision will see a half-point move that will take the benchmark deposit rate positive for the first time in eight years. Things move fast when the tide changes.

With consumer prices rising at an 8.1% annual pace in the euro area in May, there was an overriding need to signal that the fight against inflation begins here and now. President Christine Lagarde clearly is in peril of losing control of the governing council, so the hawks are demanding satisfaction. Delay now means they'll just be demanding further and faster hikes later this year.