By Balazs Koranyi
SINTRA, Portugal (Reuters) – Slovenian policymaker Bostjan Vasle said euro zone inflation persisted and rate hikes may still be needed beyond July, he said. Policymakers joined a growing camp making the case for further tightening.
The ECB has raised rates by 4 percentage points over the past year, the fastest pace on record, and has pledged to raise rates again in July, even as it reserves option.
Vasle said he favors further policy tightening and that incoming data must convince him that a September rate hike is not needed, not the other way around.
“Given persistent inflation, we need to continue to tighten monetary policy at the next meeting,” Wassler told Reuters on the sidelines of the ECB’s central bank forum.
“Other than that, we will continue to rely on data,” he said. “But the burden of proof is on them to show that no further rate hikes are needed, not that further rate hikes are needed.”
European Central Bank President Christine Lagarde warned on Tuesday that inflation could be higher than feared More persistent, ECB watchers interpret the argument as a signal for further rate hikes. might need.
Vassell dismissed the notion that weaker growth data would ease the ECB’s job and get some work done, as recessionary environments tend to be naturally deflationary.
While manufacturing did fall into recession, while the peripheral economies of the euro area performed well, the services sector was booming even ahead of the upcoming tourist season.
“All of this suggests that growth developments are not significantly different from our most recent forecasts,” Wassler said.
At the same time, a hot labor market, growing labor shortages and elastic consumption all add to price pressures.
It also casts doubt on the argument of some ECB policymakers that corporate profit margins will fall this year, absorbing some of the wage gains and easing price pressures.
“There are significant risks to expectations that corporate profit margins will fall and absorb some of the impact of rising wages,” Wassler said.
“The labor market is strong and consumption is resilient. As a result, companies are likely to continue to enjoy pricing power, especially as demand is too strong to drive down margins.”
