Central banks in Europe join US Fed in slowing down the pace of interest rate hikes

London, Dec 15

Central banks in Europe joined the US Federal Reserve in slowing down the pace of interest rate hikes as decades-high inflation shows signs of easing, media reports said.

The Bank of England and the European Central Bank both hiked rates by half a percentage point on Thursday in their final meetings of the year. Previously, they had gone with increases of three-quarters of a percentage point.

But they insisted that the fight to tame inflation isn't over, despite the risk that further rate hikes next year will pile pressure on a slowing economy, CNN reported.

The UK is already sliding into a recession, and Europe may not be far behind.

The ECB said GDP across the 19 countries that use the euro may contract this quarter and next due to high energy prices, ongoing uncertainty, weak global activity and tighter financial conditions, CNN reported.

According to the bank's projections, a recession "would be relatively short-lived and shallow", it added.

Both central banks indicated that they expect to keep hiking interest rates in the new year to keep inflation heading back down to their 2 per cent targets.

"We have more ground to cover," ECB President Christine Lagarde told journalists at a press conference, noting inflation "remains far too high and is projected to stay above the target for too long".

The ECB's estimates for inflation show it averaging 3.4 per cent in 2024 and 2.3 per cent in 2025, CNN reported.

Central bankers sought to make clear they were not changing course, sending a message to investors they aimed to stay tough.

"We're not pivoting," Lagarde emphasised. "We're not wavering."

But early indications that prices are rising at a slower clip are allowing policymakers to start taking it easier, following an unprecedented sprint over the past 12 months, CNN reported.

--IANS