Two more ECB policymakers back steady diet of rate hikes

FRANKFURT (Reuters) – European Central Bank (ECB) policymakers Luis de Guindos and Giannis Stournaras joined a chorus of euro zone central bankers on Friday to curb inflation last week. He supported further rate hikes in line with the pace of rate hikes towards .

The ECB hiked its key rate by 50 basis points seven days ago, and President Christine Lagarde calls for two more similar hikes after acknowledging that inflation will not fall to the ECB’s 2% target until the end of 2025. suggested.

ECB Vice President De Guindos said a 50-basis-point rise could become the new normal in the short term, and could continue for “a period of time” despite a contracting economy. I said it is possible.

“If we do nothing, things will get worse because one of the factors behind the current recession is inflation.”

De Guindos also said he was concerned that markets might underestimate the sustainability of inflation and see the current accommodative fiscal policy at odds with monetary policy. rice field.

Greek Governor Yannis Stournaras is a policy pigeon who tends to favor a more cautious approach to rate hikes, saying ECB deposit rates “could rise towards 3% by March.” told Skai Radio.

This represents an increase of 100 basis points over the next two meetings from the current rate of 2%.

They joined colleagues across the block to support further rate more

The ECB launched a plan last week to drain cash from the financial system by not reinvesting the proceeds from some maturity bonds it bought over the past decade, when inflation was too low and the central bank was trying to boost inflation. I was.

De Guindos said banks have strong capital positions and can withstand shocks from rising market rates, but hedge funds with highly illiquid and risky assets ” I have more doubts.”

Reported by Kirsti Knolle and Rene Maltezou; Authored by Francesco Canepa, Frankfurt; Edited by John Revill; Edited by Shri Navaratnam and John Stonestreet

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