MNI BRIEF: Euro Parliament Calls For More Gradual ECB Hikes

The European Parliament has called for a more “balanced and gradual” adjustment of monetary policy in its annual recommendations to the European Central Bank, which were approved by the assembly earlier on Thursday.

“The current inflation rates are based on supply shocks in energy markets due to our dependence on fossil fuels. In this respect, the ECB's tools are largely ineffective,” said MEP Randus Andressen, a German Green and author of the report, noting parliamentary support for more caution on “aggressive” rate hikes.

“We criticise the negative effects of high interest rates for the economy and employment rates,” he added.

The recommendations also called for an even closer coordination of monetary and fiscal policies in the euro area and called on the ECB to provide more justification of any future monetary policy decisions. The ECB has already indicated that it will likely raise rates by another 50 basis points at its March meeting. (See MNI SOURCES: 100bp Gap Between Hawk-Dove ECB Peak Rates)

The EP’s criticism of the ECB follows similar noises from French President Emmanuel Macron and Italian politicians in recent months as rates have risen. The ECB has called on national governments to support its inflation fight by pursuing more targeted and temporary measures to mitigate the impact of energy prices rises.