Sustained inflation in the eurozone justifies further rate hikes, according to members of the eurozone monetary authorities’ decision-making body The two central bank presidents, who have different views on how much the European Central Bank different views on how aggressive it should be, but agree that further hikes in key interest rates are still a long way off.
The ECB has some hikes left, the French central bank president admits
The European Central Bank (ECB) has done most of the work in terms of raising interest rates, but still has “a little way to go,” Bank of France Governor Francois Villerois de Garaud said Wednesday, as quoted by Reuters. This is not the first time Villeroy has tried to prepare the public for what is to come.
After the fastest rate hike in its history over the past year, the ECB is now considering whether to slow down. The next decision is expected in early May, when policymakers will decide how much higher than 3% the deposit rate needs to be to bring inflation down to the 2% target.
In a speech in Washington, Villeroy said, “I think it is premature to decide now what we are going to do in May, but maybe there is still some way to go on raising rates at the next meeting.” He made similar remarks in an interview at the end of March.
The head of France’s central bank, a member of the ECB’s Executive Board, believes that most of the rate hikes have already taken place, arguing that the biggest impact will come from the rate hikes so far. Tightening will stop once inflation begins to turn around, he argued in detail:
A turnaround in the trajectory of underlying inflation, whether real or expected with sufficient certainty, should trigger a stabilization of interest rates.
Inflation outlook warrants 50 bps hike, Austrian hawkish central bank president notes
Since July 2022, the ECB has raised rates by 350 bps, including three consecutive 50 bps hikes, but the possible outcome of the meeting scheduled for May 4 Reuters noted in a separate report that the ECB has yet to give a clear indication as to the
National Bank Governor Robert Holtzmann Oesterreich, who is also a member of the ECB’s 26-member Governing Council, told the German press that the eurozone’s monetary authorities need to keep raising rates; in an interview with the Boersen Zeitung newspaper he argued:
currently, the sustainability of inflation argues for another 50 basis points.
Holtzman clarified that “there is a great deal of common understanding in the ECB Council that we have not yet reached the end. The Austrian chief banker, who is considered a hawk among the board members, added: “We must continue to act decisively and continue to raise our key interest rates markedly after May.”
