Central Bank Governors Indicate Europeans to See More Interest Rate Hikes – Although the European Central Bank (ECB) has completed the majority of its interest rate increases, it still has a little bit of work to do, according to Banque de France Governor Francois Villeroy de Galhau, who was quoted by Reuters on Wednesday. It is not the first time Villeroy has informed the public of upcoming events.
The ECB is currently debating whether to reduce the rate hikes, which have occurred at the fastest pace ever over the past year. The next decision is anticipated to be made at the beginning of May, when policymakers will determine how much higher than 3% the deposit rate must be in order to achieve the inflation target of 2%.
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“We may possibly still have a little way to go on rate hikes at our next meetings, though I think it’s premature to decide now what we will do in May,” Villeroy said in a speech in Washington. He made a similar statement in an interview at the end of March.
The head of the French central bank, who is a member of the ECB’s Governing Council, believes that the majority of rate hikes have already been implemented and argues that previous rate hikes will have the greatest impact. The tightening can stop once inflation starts turning around, he insisted, elaborating: “A turnaround in the trajectory of underlying inflation – be it actual or expected with sufficient certainty – should be a trigger for stabilizing our rates.”
Reuters noted in a separate report that the ECB has raised interest rates by 350 basis points (bps) since July 2022, including three consecutive 50-bps increases. However, the ECB has not yet provided a clear indication regarding the potential outcome of its impending meeting on May 4.
Robert Holzmann, governor of the Oesterreichische Nationalbank and member of the ECB’s 26-member Governing Council, told the German press that the eurozone’s monetary authority must continue to raise interest rates. In an interview with the German newspaper Boersen Zeitung, he insisted, “The persistence of inflation currently argues for another 50 basis points.”
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“There is a great deal of common understanding in the ECB Governing Council that we have not yet reached the end,” Holzmann revealed. “We must continue to act decisively and continue to raise key interest rates noticeably even beyond May,” added Austria’s chief banker who is considered a hawk among the Council’s members.
Two other members of the Council, the Governor of the Croatian National Bank, Boris Vuji, and his colleague at the reins of the Bank of Slovenia, Bot Vasle, have recently emphasized the likelihood of future rate hikes. Vasle was quoted as saying that core inflation is obviously on an upward trend, while Vuji acknowledged that additional increases may be forthcoming.
