© Reuters. FILE PHOTO: A view reveals the brand of the European Central Bank (ECB) exterior its headquarters in Frankfurt, Germany March 16, 2023. REUTERS/Heiko Becker/File Photo
By Sabine Siebold and Paul Carrel
(Reuters) – The European Central Bank (ECB) will doubtless want to boost rates of interest additional to tame persistent inflation, two main hawks on the financial institution’s policymaking Governing Council stated on Saturday, whereas taking part in down the danger of repeat of the 2008 monetary disaster.
The feedback from the central financial institution chiefs of Austria and Belgium backed up remarks a day earlier from two fellow hawks – their Slovakian and Lithuanian friends – and pressed the case for greater charges to tame inflation working at 8.5% within the euro zone.
The ECB raised rates of interest as promised by 50 foundation factors on Thursday, sticking with its combat towards inflation and going through down calls by some buyers to carry again on coverage tightening till turmoil within the banking sector eases.
Robert Holzmann of Austria and Pierre Wunsch of Belgium stated additional motion would doubtless be wanted.
“Inflation is proving much tougher than thought,” Holzmann advised Austria’s ORF 1 radio. “I do expect some more interest rate hikes.” He added that the extent of additional will increase can be data-dependent.
The ECB has hiked charges by 350 foundation factors since final July, lifting its benchmark refinancing price to three.5% on Thursday.
“We know that we have to do more of this,” Wunsch advised Belgian paper L’Echo. “At what measure? That’s not clear. It will be meeting by meeting.”
Asked how excessive the benchmark price might go, Holzmann replied: “Some of us are hoping it will stay below 4(%). I’m afraid it’s probably going to go above 4(%).”
Wunsch stated the ECB had a “long way to go” if its baseline inflation forecast materialised.
The ECB on Thursday projected inflation would stay above its 2% goal via 2025, based mostly on forecasts it stated had been formulated earlier than an enormous selloff in financial institution shares this week.
The ECB additionally acknowledged on Thursday the outlook had turn into extra unsure after the collapse of two banks within the United States and extra issues at Credit Suisse Group.
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Banking shares globally have been battered since Silicon Valley Bank collapsed and Credit Suisse was compelled to faucet $54 billion in central financial institution funding, elevating questions on different weaknesses within the monetary system.
Asked if he noticed the danger of one other international monetary disaster, like that of 2008, Holzmann replied: “No, because both – the Silicon Valley Bank problems and now Credit Suisse – are rather special problems.”
Credit Suisse was coping with “a longstanding restructuring problem”, he added.
Wunsch stated: “We don’t see a structural problem with European banks”, although he added it remained to be seen what influence the occasions within the U.S. banking sector and round Credit Suisse would have in coming days.
“We do neither see a risk of contagion nor a risk of instability if we look at the figures from a rational perspective,” Wunsch added.
Asked about the way forward for Credit Suisse, Wunsch stated he solely noticed a “very low” probability that the financial institution may go bankrupt.
“For one, according to the public figures its situation is not bad, in itself, and, secondly, the Swiss authorities would intervene if necessary as it is a bank of systemic importance,” he stated.