The European Central Bank may need to raise interest rates up to three times this year to fight higher inflation, said Robert Holzmann, a member of the ECB ‘s Governing Council and central banker of Austria, in an interview with the Austrian newspaper Salzburger Nachrichten.
“I think it would be appropriate to take at least two or even three steps,” Holtzmann told raising interest rates. “These could be smaller, like 0.25 percentage points each. “If this was done by December, it would mean that by 2023 bank deposit rates, which are now minus 0.5%, would be in positive territory,” Holtzmann said.
The Austrian central banker said any such rate hike would continue to keep lending rates well below historical averages.
Asked how much the US Federal Reserve’s move to raise interest rates would affect the ECB’s decisions, Holtzman said: “The ECB should definitely take that into account in its decision in July. Because this increase in interest rates confirms the announced course of the Fed. “This increases the interest rate gap with Europe, which in turn means that the pressure on the euro exchange rate has increased further.”
Analysts expect the ECB to likely raise interest rates in July as average inflation in the eurozone is currently at 7.5%.
Olli Rehn: Rate of interest rates from July
The Governor of the Central Bank of Finland, Olli Rehnin a statement to German media in favor of the European Central Bank (ECB) raising its benchmark interest rates in July, as the eurozone has been faced with a dramatic rise in inflation.
“We need to avoid raising inflationary expectations,” he said in an interview with Die Welt, referring specifically to the Russian invasion of Ukraine.
“It is therefore important that we send a message in this direction. “I agree to raise the reference rates in the third quarter, probably in July,” he added.
Inflation reached an all-time high of 7.4% in March on an annual basis, well above the ECB’s target of around 2% in the medium term.
The development is expected to push Europe’s central credit institution to raise its benchmark interest rates, as other central banks have already done or announced, experts say.
It is expected to decide depending on the course of the war in Ukraine.
The increase in reference rates, which would be the first since 2011, would be a major step in the process of smoothing out the monetary easing adopted by the crisis, especially that of the new coronavirus pandemic from 2020.
“In my opinion, raising interest rates is possible in July,” said Isabel Schnabel, a member of the ECB’s executive board, in the German financial press last Tuesday.