Latest rate hike might not be last-ECB

Stubborn euro-area inflation could force the European Central Bank (ECB) to raise interest rates again, according to Governing Council member Robert Holzmann.The Austrian policymaker defended the decision to lift the deposit rate for a tenth straight time and said the conclusion that the current level of borrowing costs will substantially advance the fight against price rises shouldn’t be understood as the ECB going soft.“We definitely can’t say that this was the final hike,” Holzmann said in an interview in Santiago de Compostela, Spain, where he’s attending a gathering of European finance chiefs. “The likelihood isn’t big, but there is a risk more tightening might be needed.”The comments put Holzmann in line with other central bank governors who have warned against taking a break from tightening too soon.Slovenia’s Bostjan Vasle said on Friday he wouldn’t rule out the need for further hikes, while Bank of Latvia head Martins Kazaks argued that another increase may yet be necessary.The ECB’s president, Christine Lagarde, said after the latest rate decision that it’s too soon to say if the peak has been reached.Others signaled they believe the ECB has finished hiking for now. Vice President Luis de Guindos and Estonian central bank head Madis Muller both said current levels may be sufficient to return inflation to the institution’s medium-term target of 2%.Economists are united in their assessment that the ECB is done raising rates, and traders were betting within minutes of the policy announcement that another hike was increasingly unlikely.“Looking at some of the reactions to our decision, one could think we agreed on a dovish hike,” said Holzmann. “I don’t agree with such an interpretation, especially given that inflation risks haven’t receded of late.”The economic outlook has deteriorated quickly over the past weeks, however, a situation that’s kept economists and investors in suspense over whether the ECB would go through with its latest increase. “It wasn’t an easy decision and in order to come to an agreement we had to weigh all arguments very carefully,” Holzmann said. “That’s why I believe we can be satisfied with the result.”-Fin24

Latest rate hike might not be last-ECB

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