FRANKFURT (Reuters) – The European Central Bank (ECB) must keep raising interest rates because underlying inflation remains strong, two of its officials, supporters of monetary orthodoxy, said on Friday, despite the turmoil in the banking sector.
Less than 24 hours after the ECB meeting, Slovak central bank governor Peter Kazimir and his Lithuanian counterpart Gediminas Simkus are already challenging the new official line that future rate decisions will depend on developments. Datas.
The ECB acknowledged that the level of uncertainty was high and said it was carefully monitoring market tensions after the collapse of medium-sized banks in the United States and the difficulties encountered by Credit Suisse.
However, Peter Kazimir, seen as a “hawk” when it comes to monetary policy, said the ECB should continue to raise borrowing costs.
“Even the current events in the financial markets do not change my mind about the need to continue,” he said in a blog post. “I am fully aware of the delicacy of the situation (…) but we have not yet reached the finish line”.
“The upside risks (on inflation) are much greater (than the downside risks),” he added.
Gediminas Simkus, chairman of the board of the Bank of Lithuania, told reporters he believed Thursday’s rate hike “was not the last”.
Neither of the two, however, advocated an increase at the next meeting on May 4, Peter Kazimir stressing that it was useless to speculate on a decision on this date.
Banque de France Governor François Villeroy de Galhau said Thursday’s rate hike reflected the priority given by the ECB to the fight against inflation and showed great confidence in the solidity of European banks.
Goldman Sachs, HSBC and Barclays anticipate that the central bank should slow the rise in its rates in May with a rise of a quarter of a point, whereas they forecast 50 basis points previously.
“We think further rate hikes (by the ECB) are likely despite financial market volatility, as the risk of broad contagion within the banking sector still appears limited and core inflation is likely to remain strong in the coming months. come,” Goldman Sachs economists said.
The new ECB forecasts show that core inflation should remain above the 2% target for years to come.
Excluding food, energy, alcohol and tobacco, the consumer price index in the euro zone posted an increase of 5.6% over one year in February, up after 5.3% in January.
(Balazs Koranyi, Leigh Thomas and Andrius Sytas; written by Francesco Canepa, French version Laetitia Volga, edited by Blandine Hénault)
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