The European Central Bank (ECB) should raise interest rates by 50 basis points at each of its next four meetings as inflation is proving stubborn, Austrian central bank chief Robert Holzmann told the German business daily. Handelsblatt.
The ECB has raised rates three percentage points since July and has announced a 50 basis point hike for March. He has left the door open to subsequent movements, which, according to him, will be decided “meeting to meeting” and will depend “of the data”.
However, Holzmann, an avowed conservative -or “a hawk” in terms of monetary policy-, stated that, based on current trends, he would be in favor of a 50 basis point hike in March, May, June and July.
“I think inflation will take a long time to come down“, said Holzman on Monday. “My hope is that in the next 12 months we will have hit the interest rate ceiling.”.
The four climbs proposed by Holzman they would place the deposit rate at 4.5%, well above the 4% maximum expected by the markets, a level that no other monetary policy maker has so far defended in public.
“If we want inflation to return to 2% in the foreseeable future, we have to be restrictive“, said Holzmanarguing that only a 4% deposit rate will start to restrict growth.
Holzman He also urged the ECB to accelerate the reduction of the bank’s balance sheet, possibly ending all reinvestments from its Emergency Purchase Program earlier than planned (PEPP).
Currently, all debt maturing under the PEPP will be fully reinvested in the market until 2024.
Source: Reuters
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