(Finance) – “If core inflation remains at the level we see in Europe today, above 5%, and if we do not receive clear signals that core inflation is coming down, we will have to do more“. He said so Pierre Wunschgovernor of the Belgian central bank and member of the Governing Council of the European Central Bank (ECB), at a press conference.
“For me it is not excluded that we could look at rates of 4% – he added, as reported by Reuters – But I want to reiterate that I will not make any judgment on where rates should go without seeing developments in core inflation”.
Morgan Stanleyin a note released this morning, said he now expects the ECB to reach a terminal rate by 4% and which will only interrupt its hike cycle in September 2023.
Wunsch wasn’t the only central banker to speak in the morning. “It is very probable that (March) will not be the last hike of the cycle,” said the Estonian ECB board adviser, Madis Mulleradding that “it is also possible that interest rates should remain at elevated levels for some timeto make sure that inflation comes back and stays in the vicinity of 2%”.
The governor of the Slovenian central bank takes the same line, Bostjan Vaslewho said: “My personal expectation is that the increase planned for the March meeting, of 0.5 percentage points, will not be the last. We will have to continue to raise interest rates in the following months“.
“I expect the increase expected at the March meeting to be followed by further increases before reaching a sufficient level to bring inflation back towards the 2% target,” he added.
No statements on rates from ECB Vice President Luis De Guindos, who however recalled that in parallel with the rise in the cost of money, starting this month, a “passive quantitative tightening“, that is, by not fully rolling over the government bonds of its stocks when they reach maturity, in a controlled manner, to accompany the monetary tightening.
“It is very important to keep inflation expectations firmly anchored, to avoid a spiral between prices and wages which would be a very complex situation. It is also important that the inflation convergence towards the 2% target in a stable manner“.