Further rate hikes are justified by the persistence of inflation in the euro zone, according to members of the decision-making body of its monetary authority. Two central bank governors, with differing opinions on the degree of aggressiveness of the European Central Bank, nevertheless agree on the fact that other key rate hikes are still to come.
The ECB still has some hikes to do, admits the head of the Banque de France
Although the European Central Bank (ECB) has done most of the work in terms of raising interest rates, it still has “a bit of a way to go”, Banque de France Governor François Villeroy de Galhau said on Wednesday, as quoted by Reuters . This isn’t the first time Villeroy has prepared the public for what’s to come.
After the fastest rate hike on record over the past year, the ECB is now looking to slow down the hikes. The next decision is expected in early May, when policymakers will determine how far above 3% the deposit rate needs to be to bring inflation back to the 2% target.
“We may still have a bit of a way to go to increase rates at our next meetings, although I think it is premature to decide now what we will do in May,” Villeroy said in a speech at Washington. He made a similar claim in an interview in late March.
The head of France’s central bank, who is a member of the ECB’s Governing Council, believes most of the rate hike has already been done and says the biggest impact will come from previous rate hikes. The tightening can stop once inflation starts to pick up, he insisted, adding:
A reversal in the trajectory of underlying inflation – whether real or anticipated with sufficient certainty – should be a trigger to stabilize our rates.
Inflation outlook warrants 50 basis point hike, says Austrian central bank’s hawkish governor
Since July 2022, the ECB has hiked interest rates by 350 basis points (bps), including three consecutive 50bp hikes, but it has yet to provide a clear indication of the potential outcome of its next May 4 meeting. Reuters noted in a separate report.
Oesterreichische Nationalbank Governor Robert Holzmann, who also sits on the 26-member ECB Governing Council, told the German press that the eurozone monetary authority should continue to raise interest rates. interest. In an interview with the Boersen Zeitung newspaper, he insisted:
The persistence of inflation currently argues for an additional 50 basis points.
“There is a great common understanding within the Governing Council of the ECB that we have not yet reached the end,” revealed Holzmann. “We must continue to act decisively and continue to raise key interest rates significantly even beyond May,” added the head of the Austrian bank, considered a hawk among the members of the Council.
Expectations of further rate hikes were recently underlined by two other members of the Council – the governor of the National Bank of Croatia, Boris Vujčić, and his colleague at the head of the Bank of Slovenia, Boštjan Vasle. Core inflation is clearly on an upward trend, Vasle said, while Vujčić acknowledged that further rises may follow.
By how much do you think the ECB will raise interest rates in May? Share your predictions in the comments section below.
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