ECB may need to keep raising rates: policymaker

THE European Central Bank (ECB) may need to raise interest rates longer than previously thought to help tame inflationary pressures, policymaker Peter Kazimir said on Sunday (May 14).

Speaking to Slovak news site HN Online.SK, Kazimir referred to comments made last week when he said September may be the earliest point at which policymakers could judge whether past rate hikes have been effective.

“I am convinced that there are more meetings ahead of us where we will decide on raising rates – and I think we will raise them further,” he said in an interview published online.

“It’s no secret that given the fundamentals, I would also be satisfied with a 50 basis point increase in interest rates – but a 25 basis point increase is a return to normal,” he added. “And that means we may stay with interest rate hikes longer than we originally thought.”

The ECB has raised rates at each of its past seven meetings to fight a historic surge in consumer prices, and policymakers have signalled further hikes to come as inflation pressures continue to build.

But the bank slowed the pace of hikes to 25 basis points earlier this month, the smallest increment since tightening started last July, arguing that past measures are still working their way through the economy and overall inflation has passed its peak.

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“Headline inflation in the eurozone sometimes falls and then rises again a bit but the key point is that core inflation is still creeping up,” Kazimir said. “And that’s proof that we have a problem and that we haven’t solved the problem yet.” REUTERS