FRANKFURT (Reuters) – The European Central Bank (ECB) could continue to raise interest rates for longer than expected and its officials will be able to judge the effectiveness of monetary tightening probably from September, said said Tuesday Peter Kazimir, one of the member of the Board of Governors.
The ECB last Thursday raised its rates by a quarter of a point, a smaller increase than the previous ones, and indicated that other increases should follow.
“Based on the current data, we will have to keep raising interest rates for longer than expected,” Peter Kazimir, Governor of the Bank of Slovakia, wrote in a blog post. “The slowing of the pace to 25 basis points is therefore a step that will allow us to gradually increase rates for longer, if necessary and justified by incoming data.”
Markets expect a further increase in June, but are divided on the measures that will follow.
Some ECB officials, however, hinted that several rate hikes would be needed, saying that once rates hit terminal levels, they should stay there for a while.
According to the institution, inflation will drop below 3% by the fourth quarter, then it will take another two years before it returns to the 2% target.
“The evolution of underlying inflation, the continuous increase in wage pressures and the high profit margins (of companies) call for vigilance and confirm once again the need to continue on our path”, declared Peter Kazimir.
“We anticipate that we will be able to answer for the effectiveness of our measures no earlier than September.”
(Report Balazs Koranyi, Laetitia Volga, edited by Kate Entringer)
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