“This is a central bank that is almost like a circus at times,” said Simon Harvey, head of FX analysis at Monex Europe, a foreign-exchange company. “We haven’t really seen it over the past year, because the conditions warranted a kind of a cohesion and alignment behind a unified course of tackling inflation. But now you are starting to see the cracks appear.”. Since July, 2022, the ECB has raised its key interest rates by 425 basis points.
The impact of that tightening is apparent. In Germany, building permits for apartments plunged by 27 per cent in the first half of 2023, compared to the same period a year earlier. Factory output and orders have fallen sharply across the region, and bank lending has tailed off. TheAt the same time, the labour market is a source of strength. The unemployment rate has held at an historic low of 6.4 per cent.
But some central bankers are more explicit in their views. The head of Slovakia’s central bank, who is part of the ECB’s governing council, recently called for a final hike on Thursday. Others skew more dovish. “In the monetary dimension, the risk of ‘overdoing’ [it] is starting to materialize,” Mário Centeno, the Governor of the Bank of Portugal, wrote in a report this month.