'Not the right time' to stop rate hikes: ECB economist

AFP , Tuesday 25 Apr 2023

The European Central Bank's chief economist on Tuesday said it was 'not the right time' to end interest rate hikes, despite easing inflation in the eurozone.

Eurozone inflation
Picture taken on December 16, 2021 shows the headquarters of the Europen Central Bank (ECB) in Frankfurt am Main, western Germany.AFP


The ECB has raised rates by 3.5 percentage points since July last year in an unprecedented campaign of monetary tightening to bring soaring consumer prices under control. 

The central bank holds its next meeting on May 4 and, with inflation in the 20-nation currency club slowing, all eyes are on whether policymakers will implement another hike, and by how much.

Current data are "indicating that we should raise rates again", chief economist Philip Lane said.

"This is still not the right time to stop," he said in an interview published on the ECB's website. 

In March, consumer prices in the eurozone rose by 6.9 percent on an annual basis.

The figure was the lowest rate recorded in a year, and much below the peak of 10.6 percent recorded in October.

Lane said the "significant" drop was "welcome, as it reduces pressure on the cost of living". 

Nevertheless, it was "most important" to return to the ECB's inflation target of two percent "within a reasonable time period", he said. 

ECB board member Isabel Schnabel had on Tuesday also suggested the Frankfurt-based bank would not shy away from further rate increases. 

"I would say it's clear that further rate hikes are needed, but the size of the rate hikes is going to depend on the incoming data," she said. 

Depending on the data, a hike of as much as 50 basis points was "not off the table", she said.


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