(Updated with details)
FRANKFURT, Nov 21 (Reuters) – The European Central Bank will raise key rates again in December and in 2023 but the case for a 75 basis point hike has waned, said Philip Lane, the Bank’s chief economist. ECB.
The basis for looking at “a very big upside, like 75 basis points, is not there anymore,” Philip Lane said in an interview with Market News. “The more you have already done cumulatively, the pros and cons of any increase change.”
The ECB is not about to suspend its cycle of rate hikes but it is heading towards the “opportunity moment for lower increases” and the “more mechanical” reduction of its bond holdings.
“I don’t think we’re going, meeting by meeting, to tie the rate decision with the pace (of reinvestments) for the next month or two,” Philip Lane said. “It should probably be more mechanical than that.”
He hinted that inflation in 2023 will be higher than the ECB forecast in September, given rising energy prices and government deficits, but added that the outlook for the next two years were more nuanced.
“For those years, forecasts will have to take into account the fact that inflation has a knock-on effect, for example, on the wage mechanism,” added Philip Lane. “But on the other hand, the financial conditions are quite different from what we had in the September forecast.” (Balazs Koranyi, French version Laetitia Volga, edited by Kate Entringer and Sophie Louet)
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