Members of the European Central Bank (ECB) Executive Board acknowledged that further rate hikes may be necessary amid persistent inflation pressures. At the same time, the cycle of the highest rate hikes could soon be over, officials noted.
The end of the most aggressive rate hikes despite inflation is in sight, but more are coming
before it ends.”
Two members of the Governing Council of the European Central Bank (ECB) shared their assessment of the eurozone’s inflation outlook and their expectations regarding the monetary authorities’ next move in this regard, Bloomberg reported.
According to Boris Vujicic, most of the current cycle of rising interest rates is over, but could continue. Speaking in his home country on Wednesday, the National Bank of Croatia governor said that if core inflation (long-term inflation) remains above 4%, further rate hikes can be expected.
Vujčić explained that consumer price inflation has been moderated mainly by base effects, but underlying pressures remain high, excluding variable items such as food and energy.
The Eurosystem’s main decision-making body consists of the six members of the ECB Executive Board and the national central bank governors of the 20 countries that have adopted the common European currency.
At the same event in Croatia, Boštijan Vasle, a colleague of Vučić, pointed out to the participants that, among other things, service price growth is moving further and further away from the ECB’s 2% target. He was quoted as saying:
Core inflation is clearly on the rise.
Vasle, Governor of the Bank of Slovenia, said that further monetary tightening is needed and warned that the previous shock may not have fully passed yet.
Other ECB representatives recently suggested that the end of the eurozone’s most aggressive interest rate hike period is imminent. However, despite persistent concerns about the health of the banking sector, they believe that further action is needed to reign in inflation.
That includes Austrian central bank Governor Robert Holtzmann, who said this week that a further halving is “possible.” Policymakers are expected to announce their next decision on interest rates in May. Last week, Bank of France Governor François Villeroy de Garaud hinted that “we maybe still have a little way to go.”
In March, the European Central Bank raised its deposit rate from 2.5% to 3% amid the deepening crisis at Swiss banking giant Credit Suisse. Amid the current uncertainty, ECB officials are reluctant to predict future moves.
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