ECB could raise rates “beyond March”, say Kazimir and Simkus

VILNIUS, Feb 3 (Reuters) – The European Central Bank (ECB) is likely to raise interest rates in May, on top of the hike announced for March, two members of the bank said on Friday. one of them believing that the level at which rates could peak is beginning to appear.

The ECB raised rates another half a point on Thursday and pledged to do the same at its next meeting in March. She kept her options open on the measures that will follow, raising questions among investors about her willingness to continue raising rates.

Bank of Slovakia Governor Peter Kazimir and Bank of Lithuania Chairman Gediminas Simkus, who both sit on the ECB’s Governing Council, said the tightening of monetary policy will not will not end in March, as inflation is still much too high, even if an improvement is observed.

“The March raise will not be the last,” Peter Kazimir said in a statement. “We will decide how many more will be needed later.”

Gediminas Simkus said the magnitude of the rise in May could be 25 or 50 basis points, adding that a 75 basis point increase was unlikely.

They confirmed what sources told Reuters after Thursday’s meeting.

While neither said where the rate hike might end, Gediminas Simkus said the ECB could be approaching a peak.

“I see positive trends on inflation,” he said. “I think we’re already getting closer to that terminal rate.”

Analysts polled by the ECB expect the price index to almost return to the ECB’s target in 2025, at 2.1%. Markets currently value the terminal rate at 3.35%.

Peter Kazimir and Gediminas Simkus both dismissed the idea of ​​a rate cut at the end of the year but the head of the Lithuanian central bank estimated that a cut in 2024 is possible if the dominant trend is towards disinflation. (Report Andrius Sytas in Vilnius and Robert Mueller in Prague; written by Balazs Koranyi and Francesco Canepa, French version Laetitia Volga, edited by Blandine Hénault)