Economic news

ECB needs ‘significant’ rate hike in Sept, Villeroy says

2022.08.27 20:02

ECB needs 'significant' rate hike in Sept, Villeroy says
ECB needs ‘significant’ rate hike in Sept, Villeroy says

 

JACKSON HOLE, Wyo. The European Central Bank (ECB) needs another significant interest rate hike in September and should hit the “neutral” level before the end of the year, French central bank chief Francois Villeroy de Galhau said on Saturday.

The ECB raised rates by 50 basis points to zero in July to fight inflation that is now approaching double-digit territory and another such move is now fully priced in by financial markets.

Considered a centrist on the bank’s rate-setting Governing Council, Villeroy said that rates should keep rising until the ECB hits the neutral level, which is somewhere between 1% and 2%. At the neutral rate, the central bank neither stimulates nor holds back growth.

“We could be there before the end of the year, after another significant step in September,” Villeroy told the U.S. Federal Reserve’s Jackson Hole Economic Symposium.

While markets have been betting on a 50 basis point move in September, several ECB policymakers, including Dutch central bank chief Klaas Knot and Austria’s Robert Holzmann, have said that 75 basis points should also be part of the discussion.

Villeroy said the ECB was willing to go higher than the neutral level, if needed.

“Have no doubt that we at the ECB would if needed raise rates further beyond normalization: bringing inflation back to 2% is our responsibility; our will and our capacity to deliver on our mandate are unconditional,” he added.

Specific forward guidance, as provided for years, is now viewed as unadvisable given global economic uncertainties.

Villeroy did not openly acknowledge the increasing risk of a recession, but did note that growth prospects were receding while the inflation outlook is deteriorating.

The banker said the ECB also needs to consider changes to how it handles excess reserves.

Banks sit on trillions of euros worth of excess liquidity and an increase of rates into positive territory provides banks with large risk-free returns, leaving the central bank with similar losses.

Villeroy promised a “swift and pragmatic” assessment of reserve remuneration, but did not provide specific proposals.

“Just as we did with the tiering scheme, we have to think about a reserve remuneration system adapted to this new context,” he said.

Source

ECB needs ‘significant’ rate hike in Sept, Villeroy says

Related Articles

Leave a Reply

Back to top button
bitcoin
Bitcoin (BTC) $ 81,996.97 2.38%
ethereum
Ethereum (ETH) $ 1,904.74 1.66%
tether
Tether (USDT) $ 0.999953 0.02%
xrp
XRP (XRP) $ 2.26 4.01%
bnb
BNB (BNB) $ 630.61 1.17%
solana
Solana (SOL) $ 123.99 3.93%
usd-coin
USDC (USDC) $ 1.00 0.01%
cardano
Cardano (ADA) $ 0.693531 3.65%
dogecoin
Dogecoin (DOGE) $ 0.166035 4.34%
tron
TRON (TRX) $ 0.232646 5.91%
staked-ether
Lido Staked Ether (STETH) $ 1,903.13 1.60%
wrapped-bitcoin
Wrapped Bitcoin (WBTC) $ 81,838.93 2.38%
leo-token
LEO Token (LEO) $ 9.75 0.10%
the-open-network
Toncoin (TON) $ 3.60 3.82%
chainlink
Chainlink (LINK) $ 13.63 3.48%
usds
USDS (USDS) $ 0.999998 0.01%
stellar
Stellar (XLM) $ 0.267967 2.23%
wrapped-steth
Wrapped stETH (WSTETH) $ 2,275.14 2.12%
hedera-hashgraph
Hedera (HBAR) $ 0.184894 3.70%
pi-network
Pi Network (PI) $ 1.12 16.54%
avalanche-2
Avalanche (AVAX) $ 18.58 1.39%
shiba-inu
Shiba Inu (SHIB) $ 0.000012 4.25%
sui
Sui (SUI) $ 2.26 3.35%
mantra-dao
MANTRA (OM) $ 6.93 0.99%
polkadot
Polkadot (DOT) $ 4.39 0.38%
litecoin
Litecoin (LTC) $ 87.96 5.35%
bitcoin-cash
Bitcoin Cash (BCH) $ 335.01 0.90%
bitget-token
Bitget Token (BGB) $ 4.62 3.86%
ethena-usde
Ethena USDe (USDE) $ 0.999585 0.05%
weth
WETH (WETH) $ 1,903.13 1.71%
binance-bridged-usdt-bnb-smart-chain
Binance Bridged USDT (BNB Smart Chain) (BSC-USD) $ 1.00 0.06%
hyperliquid
Hyperliquid (HYPE) $ 13.37 0.02%
whitebit
WhiteBIT Coin (WBT) $ 28.13 1.32%
wrapped-eeth
Wrapped eETH (WEETH) $ 2,020.65 1.57%
monero
Monero (XMR) $ 207.27 1.69%
uniswap
Uniswap (UNI) $ 6.29 0.66%
susds
sUSDS (SUSDS) $ 1.04 0.15%
dai
Dai (DAI) $ 0.999775 0.03%
aptos
Aptos (APT) $ 5.29 1.69%
okb
OKB (OKB) $ 50.66 0.41%
near
NEAR Protocol (NEAR) $ 2.53 4.48%
pepe
Pepe (PEPE) $ 0.000007 5.91%
internet-computer
Internet Computer (ICP) $ 5.72 4.94%
mantle
Mantle (MNT) $ 0.804197 1.81%
gatechain-token
Gate (GT) $ 21.78 0.46%
ethereum-classic
Ethereum Classic (ETC) $ 17.48 3.20%
tokenize-xchange
Tokenize Xchange (TKX) $ 32.93 1.93%
ondo-finance
Ondo (ONDO) $ 0.81858 5.28%
aave
Aave (AAVE) $ 169.45 3.77%
coinbase-wrapped-btc
Coinbase Wrapped BTC (CBBTC) $ 81,994.97 2.40%