More voices join chorus in support of ECB rate hike By Reuters

by Balazs Koranyi

ALBUCH, AUSTRIA, Aug 30 (Reuters) – A chorus of European Central Bank policy makers on Tuesday called for a decisive and rapid interest rate hike to curb inflation, suggesting that next week’s election will be between a big hike and an even bigger one.

With inflation likely to reach 9% this month, before monetary policymakers head into double digits regarding higher gas prices, monetary policymakers are increasingly concerned that even the long-term outlook could exceed the two-year target. Which indicates a loss of confidence in the capabilities of the bank.

The situation puts the election for next week between 50 and 75 basis points high, after the European Central Bank raised the deposit rate last month by 50 basis points, to zero, its first rise in more than one each.

Dutch central bank chief Klaas Knott and Estonia’s Madis Mueller said they should at least discuss a 75 basis point increase, while German central bank chief Joachim Nagel called for quick action, praising the benefits of the forecast.

“Rapid normalization of interest rates is an essential first stage, and some prior focus should not be ruled out,” Knott said at the Danske Bank event. “The breadth and deepening of our inflation problem is generating the need to act aggressively.”

For their part, ECB Governing Council member Isabelle Schnabel and François Villeroy de Gallo, President of the French Central Bank, supported a strong or significant rate hike over the weekend.

Market futures are forecasting a 50 basis point move and a high probability of a 75 basis point hike, which indicates that the ECB could go either way.

“I think 75 basis points should be in the September options,” Mueller said. “We shouldn’t be too scared about monetary policy moves because inflation has been very high for a very long time and we are still well below the neutral rate.”

In addition, the US Federal Reserve has raised interest rates by 75 basis points in successive meetings and there may be another similar move, weakening the Euro and further accelerating inflation in the Eurozone.

While many policymakers say the goal is first to move prices to a “neutral” level, where the European Central Bank neither stimulates nor calms growth, Knott said the rate – between 1% and 2% – may not be enough and that restrictive monetary policy It may not be enough. there is a need.

Two days before a period of silence by the European Central Bank, Belgium’s central bank president, Pierre Wonche, echoed Knot’s comment, arguing that tight monetary policy may be necessary even with a recession now likely.

“I think the consensus is that we have to move quickly to a level that is at some point … constraining,” Winch said.

The complexity is that higher energy prices will reduce consumption and affect industrial production, which is sure to push the mass into recession during the winter.

“We should not postpone any further rate hike for fear of a possible recession,” Nagel said. “Inflation rates will not go back to the central bank’s inflation target on their own.”

Okdah, who said it leans about 75 basis points, added that due to the labor shortage, companies are more likely to “stockpile” workers in the early stage of the downturn, so this slump will not shake the economy as some expect.

“Even if this slowdown materializes, it is unlikely on its own that inflation will return to our medium-term target,” he said.

(Reporting by Palaz Curani in Alpach, Austria; Editing in Spanish by Javier López de Lleida)