Villerois (EKT): The next rate hike must be ‘regular and predictable’

His opposition to the possibility of a giant rate hike by the ECB next week, which seems to be prevailing in recent hours in market estimates, was taken by French central banker Villeurat de Gallo, saying that the Bank’s next move should be “regular and predictable “.

Eurozone inflation hit a new all-time high of 9.1% in August, prompting Goldman Sachs and Bank of America to revise their estimates for the bank’s interest rates, now predicting a “mammoth” hike at next week’s September meeting, according to 75 basis points (0.75%) in Fed standards.

In the same mood, bets on swaps linked to Eurobank interest rates show that traders now expect an increase of around 75 bp. until October (and another one of 50 m.v. height).

But for his part, the head of the Bank of France and member of the ECB’s board, Villeurat de Gallo, said today that “after the first interest rate increase in July, we will decide on the next step next week. We should we do with determination but (also) in a regular and predictable way.”

He said the rise in inflation, initially caused by a spike in energy prices, has spread to the wider economy and has spilled over into services, although there are no signs of an upward wage-price spiral yet.

Despite the energy shock, however, Mr. Villeroy estimated that the possibility of a recession in Europe in 2022 is not likely, pointing out, however, that nothing is ruled out for next year.

He added that the French economy would grow at a rate of at least 2.3% as the central bank had forecast in June, but that a sharp slowdown would follow in 2023, though probably not a recession.