Persisting inflation in the eurozone is prompting central bank authorities to lean toward higher interest rate hikes, two members of the governing body have declared.
ECB Could Make Further Rate Increases, Bank of France Governor Suggests
The European Central Bank (ECB) has already raised its key interest rate significantly over the past year, but according to Banque de France Governor Francois Villeroy de Galhau, there may be a “little more to go” in terms of increases. Villeroy has previously expressed his opinion that the ECB has done most of the rate-raising and that the largest impact will come from the previous hikes. He further elaborated in a speech in Washington:
A turnaround in the trajectory of underlying inflation – be it actual or expected with sufficient certainty – should be a trigger for stabilizing our rates.
The ECB will make its next interest rate decision on May 4, but has not provided any clear indication yet as to what the outcome may be. Although the rate of inflation is on the rise, the bank is considering whether or not to slow down its rate increases.
Austrian Central Bank Chief: Another 50 Bps Increase Warranted
The ECB has hiked its interest rates by 350 basis points (bps) since July 2022, making three back-to-back 50 bps increases. Robert Holzmann, Governor of the Oesterreichische Nationalbank and a member of the ECB’s Governing Council, believes this is not enough. He told the Boersen Zeitung newspaper that the persistence of inflation warrants an additional 50 bps increase. Holzmann also noted that there is a “great deal of common understanding” among the Council that further action is needed.
The opinion is shared by two other Council members – the Governor of the Croatian National Bank, Boris Vujčić, and Bank of Slovenia Governor Boštjan Vasle. According to Vasle, core inflation is clearly on an upward trend, while Vujčić conceded that additional hikes may be necessary.
How much higher do you think the ECB will take interest rates? Share your predictions in the comments section below.
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