ECB: a member of the Council in favor of a further rate hike of 75 basis points

(Boursier.com) — One week before the European Central Bank’s next monetary policy decision, uncertainty remains high. While a new rate hike of 50 basis points seems to have the favor of the market and the majority of the members of the Board of Governors, some are pleading for a new tightening of the screw of 75 basis points. This is particularly the case of Peter Kazimir who, in an interview with ‘Bloomberg’, is in favor of a third consecutive ‘jumbo’ increase, even after inflation in the monetary bloc fell in November, a first since a year and a half.

While the slowdown in inflation to 10% last month was welcome, it is too early to say that the worst of the unprecedented price spike is over, according to the leader. “It was a nice number last month, but I’m afraid it’s too early to celebrate a peak in inflation,” said the president of the Slovak Central Bank in Bratislava. “It would not be fair to slow monetary tightening because of a single better inflation figure. I still see plenty of reasons to continue with the imposed pace of policy tightening.”

Despite the lower price increase observed in November, inflation in the euro zone remains five times higher than the ECB’s 2% target. It even reached a record of 14.5% in Slovakia, country of Peter Kazimir. A slowdown in the euro zone due to soaring energy costs will likely turn out to be “a short-term, technical recession”, he said. “This is one of the reasons why we should have the courage to take another step of a similar magnitude” to previous meetings, added P. Kazimir. “I would prefer a step that would take us into the restrictive policy phase in a way that would be relatively painless.”

Along with interest rates, ECB officials will also discuss how to begin shrinking the institution’s balance sheet, bloated by some 5 trillion euros of bonds purchased as part of stimulus measures in recent years. , a process known as quantitative tightening. “QT is inevitable, I don’t think there is any doubt that it will happen,” Kazimir said. Echoing comments from some of his colleagues, he called for the balance sheet reduction to be carried out “in a transparent and gradual manner” to ensure “it is predictable and does not increase market uncertainty”.