The European Central Bank (ECB) is likely to need to hike interest rates further, according to two prominent hawks on the bank’s policymaking Governing Council, who played down the likelihood of a replay of the 2008 financial crisis.
The European Central Bank (ECB) hiked interest rates by 50 basis points as expected on Thursday, continuing its fight against inflation despite requests from some investors to hold off on policy tightening until upheaval in the banking sector subsides.
Robert Holzmann of Austria and Pierre Wunsch of Belgium stated that additional action may be required.
“Inflation is proving much tougher than thought,” said Holzmann, speaking to ORF 1 radio in Austria. “I do expect some more interest rate hikes.”
Holzmann, when asked how high the benchmark rate could rise, responded: “Some of us are hoping it will stay below 4(%). I’m afraid it’s probably going to go above 4(%).”
Wunsch stated that the ECB has “long way to go” if the ECB’s baseline inflation estimate materializes.
“We know that we have to do more of this,” Wunsch told the Belgian publication L’Echo. “At what measure? That’s not clear. It will be meeting by meeting.”
The views of the two central bank heads echoed those of two fellow hawks – their Slovakian and Lithuanian counterparts – a day earlier and stressed the case for higher interest rates to combat the 8.5% inflation rate in the euro zone.
Since last July, the ECB has increased rates by 350 basis points, bringing its benchmark lending rate to 3.5% on Thursday.