Peter Casimir, a member of the European Central Bank’s governing board, said that the ECB’s next rate hike could be in the range of 0.25% or even 0.50%, depending on the then assessment of the situation in September, as reported by the Bloomberg agency.
“How much we raise interest rates in September and at our next meetings will be determined by economic developments in the eurozone and beyond,” the Slovak central banker said in a statement on his country’s central bank website. “So it is reasonable to expect an increase of 25 or even 50 basis points.”
His comment gives more concrete shape to the options before the ECB in relation to yesterday’s statements by its president, Christine Lagarde, which followed a more aggressive than expected increase in interest rates by half a percentage point, the first such move in 11 years. Most analysts had expected an increase of 0.25%.
“The information we received in the last six weeks convinced many of us, including myself, that we had to start aggressively, creating a shock,” Kazimir said. “This is the beginning of a series of similar steps which are necessary to tame inflationary risks.”
Traders have already factored into their movements and prices a cumulative ECB interest rate hike of 110 basis points by the end of 2022, while until recently they estimated around 130 basis points. For September, they are betting on an increase of less than 50 points.
Kr. Lagarde earlier on Friday called the ECB’s move yesterday “forward-looking” and said the next move would depend on macroeconomic data and new economic forecasts.
However, Kazimir also referred to the risks that the ECB has to face, more specifically “the widening uncertainty, the creeping recession, the problematic recovery of both the European and the global economy”.
He insisted, however, that again the ECB must remain committed to the need to bring inflation under control.
“We can’t magically compress the prices of petrol, gas or food,” he stressed. “We can take steps so that when these crazy price pressures created by the war and the pandemic subside, these trends will return to normal,” he concluded.
Source: Capital
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