By Francesco Canepa and Leigh Thomas
FRANKFURT/PARIS (Reuters) -European Central Bank policymakers warned investors who are overwhelmingly betting against an ECB interest rate hike next week that the decision was still up in the air and a rise in borrowing costs was among the options on the table.
With economic activity deteriorating across the 20 countries that use the euro and inflation easing, investors are betting the ECB will end its streak of nine consecutive rate increases on Sept. 14, even if it keeps the door open to further moves.
But speaking on Wednesday, the last day before the ECB's self-imposed quiet period, the Dutch, French, German and Slovak central bank chiefs all said the Governing Council's decision was still open.
France's Francois Villeroy de Galhau hinted that a fresh rate hike could still come at a later date and argued that the slowdown is not a recession and that the ECB needed to persevere in its fight with inflation.
"Our options are open at this Council as at the following meetings," he told reporters. "We are close, very close to the peak in our interest rates. We are however still far from the point where we could consider cutting them."
Slovakia's Peter Kazimir, an outspoken policy hawk, was more explicit, arguing that another hike was still needed to tame inflation. He said the ECB could delay a rate rise to one of its autumn meetings or pull the trigger next week.
"The second option seems preferable, reasonable, to me," Kazimir said in an opinion piece. "It is to deliver another 25 basis points next week and take a breather thereafter."
Dutch central bank governor Klaas Knot, another staunch advocate of policy tightening in the past, said investors may be underestimating the chances of a rate hike next Thursday, and that the decision would be "a close call".
Markets now see a one in three chance of a hike next week, with a move in October or December viewed as more likely.
"I continue to think that hitting our inflation target of 2% at the end of 2025 is the bare minimum we have to deliver," Knot told Bloomberg.
"I would clearly be uncomfortable with any development that would shift that deadline even further out. And I wouldn't mind so much if it shifted forward a little bit."
Bundesbank chief Joachim Nagel, also a past advocate of rapid hikes, took a similarly measured view, saying next week's decision would depend, among other factors, on the ECB's new economic projections. Rate cuts were not imminent in any case, he added.
"It would be wrong to bet on a rapid decrease in interest rates after the peak," Nagel told German business daily Handelsblatt.
Speaking to the Reuters Global Markets Forum last week, Austria's central bank chief Robert Holzmann said the ECB may still do another "hike or two" while Portugal's Mario Centeno said it needed to be very cautious about any further tightening.