Johan van Overtveldt on the ECB interest rate increase: “Too little, too late”

10 June 2022
Johan Van Overtveldt

After months of delay, the European Central Bank has decided to raise interest rates. According to MEP and former Minister of Finance Johan Van Overtveldt, this decision comes far too late. “All the signs already indicated last year that Inflation The increase in the general price level. The original meaning (literally “to blow up”) is monetary inflation, which means that the amount of money increases. Today, inflation primarily refers to price inflation. This means an implicit monetary depreciation. This causes the purchasing power to drop. inflation was going to be a problem, but the ECB has waited far too long. As a result, this intervention will not be sufficient, and more will have to be done.”

“The ECB was naturally apprehensive about the consequences of such an interest rate increase on economic growth, the government budget and the stability of the financial markets. But my point is precisely that because of the ECB’s delay, the consequences of that final interest rate increase will now be even greater,” says Johan Van Overtveldt. He emphasises that he already pointed out the dangers of high inflation last year. “Good policy is foresight, and I think the ECB has not done enough of that.”

The consequences of the interest rate increase for Belgian finances would not be so bad in the short term, says Johan Van Overveldt. “The competent people of the Finance Debt Unit have ensured that the term of our government debt has been extended from seven to ten years. As a former Finance Minister, I have always paid particular attention to that. That is to say, the interest rate increase will only have a substantial impact in one to two years’ time.”

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