By Padraic Halpin
DUBLIN (Reuters) -European Central Bank policymakers Joachim Nagel and Gabriel Makhlouf said on Wednesday they would not be surprised if interest rate increases continue into the second quarter after two expected moves in February and March.
The ECB has all but committed to raising its key rate by half a percentage point next week to 2.5%, but policymakers are expressing different preferences for March, suggesting the debate is wide open despite guidance for significant policy tightening at a "steady pace".
Makhlouf said that, as things stand, rates will need to go up again in March, but policymakers must "wait and see exactly what the data tells us." Nagel said the ECB had already committed to raising rates sharply again over the next two months.
Both agreed the hikes were unlikely to stop there.
"Bearing in mind that inflation is very high and core inflation has actually gone up slightly, it would not be surprising to see us continue on this path of interest rate rises beyond the first quarter," Makhlouf, Ireland's central bank governor, told lawmakers in Dublin.
Nagel, the president of Germany's Bundesbank, told Spiegel magazine that he "wouldn't be surprised if we have to keep raising rates even after the two announced steps."
A third policymaker, Slovenia's Bostjan Vasle, joined his Dutch and Slovak counterparts on Wednesday in explicitly calling for a 50-basis-point rate rise in March. ECB President Christine Lagarde also appeared to back such an increase this week.
Others, including the Greek and Italian central bank chiefs, have called for increased caution and gradual moves, prompting markets to oscillate between 25- and 50-basis-point increases as policymakers spar publicly on the rate outlook.
While euro zone inflation eased to an annualised 9.2% in December from 10.1% a month earlier, Ireland's Makhlouf said it remains "far too high."
"Interest rates will have to rise significantly at a steady pace to reach levels sufficiently restrictive to ensure a timely return of inflation to our 2% medium-term target," he said.