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Two or three rate hikes this year appropriate -ECB's Holzmann

Economy May 07, 2022 03:25AM ET
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© Reuters. FILE PHOTO: European Central Bank policymaker and Austrian National Bank (OeNB) Governor Robert Holzmann attends a news conference in Vienna, Austria December 2, 2019. REUTERS/Leonhard Foeger

ZURICH (Reuters) -The European Central Bank should hike interest rates as many as three times this year to combat inflation, hawkish policymaker Robert Holzmann told the Salzburger Nachrichten paper in an interview.

"I think it would be appropriate to take at least two or even three steps. These could be smaller ones, i.e. 0.25 percentage points each. If this were to happen by December, it would have the effect that by 2023 the deposit rates for banks, which are now minus 0.5 percent, would be in positive territory," the Austrian central bank governor was quoted as saying.

"You'll still be quite a bit away from the natural nominal interest rate. So there is still a long way to go. But it would be a good signal to the public."

ECB policymakers are becoming more vocal about normalising monetary policy more quickly than previously expected, with more publicly backing a July rate hike.

Asked if the ECB was too late to act, Holzmann said: "I would not say too late. But perhaps action could have been taken earlier. The U.S. is about half a year earlier in the economic cycle. In this respect, it is fitting that the ECB is acting later. Perhaps the Fed was also a little late."

Asked about the U.S. Federal Reserve's move to raise rates by half a percentage point, which supported the dollar against the euro and could fuel imported inflation, Holzmann said: "The ECB does not pursue an exchange rate target. But we are watching it closely and taking it into account in our decisions. We will probably not be able to compensate for the difference we have now by raising interest rates, but at least the gap will in all likelihood not increase significantly."

He also played down the danger of a wage-price spiral in which demands for higher salaries lock in inflation.

"We are looking closely at wage settlements. And that does not worry us for the time being. But the danger is always there in principle. If it came to that, we would have to raise interest rates more strongly to avoid possible second-round effects. That could affect the real economy, but at the moment that is not yet the case."

Two or three rate hikes this year appropriate -ECB's Holzmann
 

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Comments (6)
Meru Pet
Meru Pet May 07, 2022 5:42AM ET
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in Zürich, Switzerland, not formally in European Union?
Tyrone Jackson
Tyrone Jackson May 07, 2022 4:48AM ET
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Raise the rates all you want- inflation is 20% and you want to raise .25% ?? The Euro will drop like a rock- now go buy rubles- to buy Putin’s gas and oil. EU has zero choices. Gold is your savior- euro is paper with zero value
Fabio falec
falec May 07, 2022 4:48AM ET
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If ECB will start raising rates, the Euro will gain strength.
Tyrone Jackson
Tyrone Jackson May 07, 2022 4:44AM ET
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20% inflation and the real rates are zero! 2 or 3 hikes ?? Lol The euro will drop like a rock- stfu and buy Putin’s gas and oil. You have zero choices
Edward Chong
Edward Chong May 07, 2022 3:44AM ET
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N.A.T.O
Millennial Stacker
Millennial Stacker May 07, 2022 3:42AM ET
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They will collapse everything. No chance
FMGK Blue
FMGK Blue May 07, 2022 2:54AM ET
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Smoking pot is also appropriate... In your dreams old man
 
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