PRAGUE – The European Central Bank should deliver two more interest rate hikes of 50 basis points each despite inflation easing, governing council member Peter Kazimir said on Monday.
Inflation fell sharply over the past two months, from 10.6% in October to 9.2% in December but price growth is expected to accelerate again in early 2023 before what is set to be rapid disinflation over the course of 2023.
“An inflation drop in two consecutive months is good news. But it is not a reason to slow the tempo of raising interest rates,” Kazimir said. “I am convinced that we need to deliver two more hikes by 50 basis points.”
Although the euro zone’s central bank has been raising rates at its fastest pace on record it has so far failed to bring inflation anywhere near its 2% target.
“For me, the most important is core inflation trend,” Kazimir said.
“We are halfway through. If it were up to me, I would enter summer holidays with the tightening cycle completed. But don’t ask me today, how high we will go with the rates, and how long will they need to stay there to tame inflation as needed.”
The ECB committed at its Dec. 15 meeting to several more rate increases, although at 50 basis points apiece rather than the 75 basis points in September and October.
Analysts said that the ECB‘s policy signals don’t seem to convince investors any more, whether it is trying to raise their expectations for interest rates or lower them.