FRANKFURT (Reuters) – Many members of the Governing Council of the European Central Bank (ECB) would have preferred a steeper rate hike last month, but accepted a hike limited to a quarter point, provided that others increases are reported by the institution, shows Thursday the minutes of the debates of the meeting of May 4.

The central bank last month hiked interest rates by 25 basis points, a smaller rise than previous ones, and hinted that monetary policy tightening may continue to keep inflation under control.

Only the governor of the Bank of Austria Robert Holzmann spoke out for a larger increase, according to sources close to the debates.

“Most members have indicated they can accept the proposed 25 basis point rate hike,” the ECB said.

“The ECB’s communication should, however, convey a clear ‘directional bias’ to emphasize that, based on the current outlook, further rate hikes would be necessary.”

This explicit allusion suggests that an increase in June and July is envisaged.

Central bank governors in Germany, the Netherlands and Ireland, among others, all spoke of an increase in July due in part to price growth in the services sector, mainly fueled by labor costs.

“It was felt that the conditions were not in place to ‘declare victory’ or to show complacency about the outlook for inflation,” the ECB said in its minutes.

“It was emphasized that the lesser magnitude of the rate hike (in May) should not be interpreted as a sign that the Governing Council had opened the door to a pause in its tightening cycle,” he said. she adds.

(Balazs Koranyi, Laetitia Volga, edited by Kate Entringer)

Copyright © 2023 Thomson Reuters