Eurozone countries and the European Central Bank need to coordinate fiscal and monetary policies as they strive to bring inflation down to the ECB’s target of 2%, according to Belgian Finance Minister Vincent Van Peteghem.
(Bloomberg) — Eurozone countries and the European Central Bank need to coordinate fiscal and monetary policies as they strive to bring inflation down to the ECB’s target of 2%, according to Belgian Finance Minister Vincent Van Peteghem.
Euro-area inflation stopped slowing in August, presenting central bank officials with a dilemma as they contemplate whether upward pressure on prices is too persistent to risk a pause in interest-rate hikes. Numbers last week showed underlying inflation slowed in August, though the headline number was stable. At 5.3%, both are considerably above the central bank’s 2% goal.
“I really plead for something where there is a coordination between the monetary and the fiscal policy,” Van Peteghem told Bloomberg TV on Wednesday, stressing the importance of exchanges between ECB President Christine Lagarde and the eurozone’s finance ministers.
All eyes are on the Sept. 14 announcement from the ECB that Lagarde has said will either extend or pause the ECB’s unprecedented campaign of monetary tightening. ECB Governing Council member and Belgian National Bank Governor Pierre Wunsch signaled at the weekend that another increase in the deposit rate — currently 3.75% — may be warranted. If that happens, it will make a 10th consecutive hike, bringing the deposit rate to a record 4%.
Read more: ECB’s Knot Says Markets Risk Underplaying Hiking Chances
Van Peteghem said he is confident if there is an increase in the interests rate that “our economy will be able to deal with that.”
Van Peteghem spoke days after Belgium sold Europe’s record retail bond of nearly €22 billion ($23.6 billion) signaling rising interest from non-institutional investors to a product that offers better interest than their savings accounts. More than 600,000 people poured into one-year 3.3% coupon note.
Governments from the UK to Hungary are increasingly tapping households for funding as rising yields make sovereign bonds more attractive to savers weary of years of zero or negative rates.
Van Peteghem said Belgium sent a “loud and clear” signal to the banks to reward its customers with better returns, adding another retail bond may follow in December, although perhaps of a smaller amount.
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