The European Central Bank may have to accept a moderate recession to control inflationary price pressures if it sees signs that inflation expectations are strongly rising, Robert Holzmann, a member of the Bank’s management board, said, as reported by Bloomberg. .
“We hope that this will not become necessary,” Holzmann told Austrian state broadcaster ORF late Sunday night.
Market players are weighing the impact of an ECB rate hike on economic output in the eurozone, especially after the Bank tightened monetary policy by a more aggressive than expected 50 basis points last week.
ECB President Christine Lagarde has pledged that European central bankers will continue to raise interest rates until they achieve their goal of returning inflation close to the 2% target.
Holzmann, who also heads Austria’s central bank, said the size of a rate hike in September would depend on developments in the economic outlook. These will determine whether the next move will also be in the order of 50 basis points or less, he added.
Source: Capital
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