The European Central Bank must keep all its options open, especially with regard to future interest rate hikes, given the uncertainty surrounding the course of inflation, ECB member Francois Villeroy de Galhau said on Tuesday.
In the midst of rising inflationary risks, the euro central bank opened the door for a rate hike later this year, hinting at a March 10 meeting on how to cut bond markets.
Speaking at the London School of Economics, Villeroy said it would be useful to have a transition period between ending the pandemic bond market and ending the traditional ECB Asset Purchase Program, which he said would could be completed in the third quarter of the year.
The governor of the Bank of France also stressed that the link between the end of the bond market program and interest rate hikes could be eased if the ECB “removes” the wording that an increase could follow. immediately after.
“We could take more time and look at the latest inflation data before deciding on an interest rate hike – a decision we do not need to make before the June meeting anyway,” Villeroy said.
“Any speculation about this timetable is premature at this stage,” he added.
Villeroy also refuted market rumors that the ECB could “freeze” or delay interest rate hikes once they returned to positive territory, saying there was no “predetermined course”, although he noted that this was possible. possibility.
Regarding the risk of an “unjustified” spike in the spreads between the bonds of the eurozone countries, the French central banker stressed that the ECB could reactivate, if necessary, the emergency bond purchase program implemented in the midst of a pandemic.
Source: Capital
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