by Balazs Koranyi

WASHINGTON (Reuters) – The European Central Bank (ECB) must continue to raise interest rates because underlying inflation is still too high and its next decision on the matter could be a hike of 25 or 50 points. basis, said Thursday Bostjan Vasle, member of the Board of Governors of the European institution and governor of the central bank of Slovenia.

“We must continue to tighten monetary policy,” he told Reuters on the sidelines of an International Monetary Fund (IMF) meeting in Washington.

“It’s too early to decide the pace of our next move, but the options I’m looking at are a 25 and 50 basis point raise,” he added.

For Bostjan Vasle, the main concern of the ECB relates to the persistence of the rise in basic prices in the euro zone, that is to say excluding volatile elements, which increased in March by 5.7% over one year, far from the medium-term objective of 2% of the European Central Bank. These prices could continue to rise in the coming months.

“Headline inflation is falling, but we are all focused on core inflation, which is still moving in the wrong direction,” Bostjan Vasle said.

“This is of course no surprise given the tightening labor market,” he noted, as eurozone employment hit a record high and unemployment barely rose, even during the winter period when growth was almost sluggish.

ECB officials fear that continued labor market tensions will put additional pressure on wages, which are rising relatively fast.

“The development of the labor market and wages is the most important element in the assessment of inflation and will have a major impact on our decision,” said Bostjan Vasle.

(Report Balazs Koranyi; Claude Chendjou, edited by Kate Entringer)

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