ECB should raise rates four more times-Holzmann
2023.03.06 12:39
ECB should raise rates four more times-Holzmann
By Tiffany Smith
Budrigannews.com – The Austrian central bank chief Robert Holzmann told the German business newspaper Handelsblatt that the European Central Bank should raise interest rates by 50 basis points at each of its next four meetings because inflation is stubborn.
Since July, the European Central Bank (ECB) has increased rates by 3 percentage points, with a 50 basis point increase for March. It said that future moves would be decided “meeting by meeting” and would be “data dependent.” However, it has left the door open for them.
However, Holzmann, a outspoken conservative and policy hawk, stated that he would favor moves of 50 basis points in March, May, June, and July based on current trends.
As quoted by Holzmann on Monday, “I expect it to take a very long time for inflation to come down.” My hope is that the peak of interest rates will have been reached within the next year.
The four steps Holzmann proposes would raise the deposit rate to 4.5 percent, which is significantly higher than the market-priced peak rate of 4% and is a level that no other policymaker has yet publicly advocated.
Holzmann stated, “If we want to get inflation back to 2% in the foreseeable future, we have to be restrictive,” arguing that only a deposit rate of 4% will begin to limit growth.
Additionally, Holzmann urged the European Central Bank (ECB) to accelerate the bank’s balance sheet reduction, possibly by suspending all reinvestments in its Pandemic Emergency Purchase Programme (PEPP) earlier than originally intended.
Through 2024, the PEPP scheme intends to fully reinvested all maturing debt into the market.
