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Two ECB hawks call for further rate hikes despite banking turmoil

By Francesco Canepa and Balazs Koranyi

FRANKFURT (Reuters) – The European Central Bank needs to keep raising rates as underlying price growth is sticky, the two seen as policy hawks.

Comments from Slovakia’s central bank governor Peter Kazimir and his Lithuanian counterpart, Gediminas Simkus, appeared to challenge the ECB’s new policy, setters said on Friday. Official line – just a day ago – future decisions will depend on how the economy and markets develop.

The ECB’s language came as it raised rates for the sixth time in a row on Thursday, acknowledging that the outlook has become more uncertain following the collapse of two U.S. banks and more problems at Credit Suisse in Switzerland. .

But Kazimir, who often advocates raising interest rates to curb inflation in the euro zone, which is currently 8.5 percent, said the ECB should raise borrowing costs further.

“Not even current events in financial markets will change my view that we need to continue,” Kazimir said in a blog post. “I am very aware of the delicacy of the situation … but we are not at the end yet.”

Fellow hawk Simkus also told reporters in Vilnius that he believed Thursday’s “not the last.” rate hike”.

But none of the policymakers made a case for raising rates immediately after the next ECB meeting, with Kazimir saying it was useless to speculate on a May 4 decision.

The ECB hiked interest rates by basis points on Thursday, with inflation expected to remain at 2% until 2025 On top of the target, the forecast was said to have been made before the U.S. bank collapse sparked a sharp sell-off in the lender’s stock.

Bank of France President François Villeroy de Gallo said the rate hike reflected the ECB’s priorities for fighting inflation and signaled confidence

The European Central Bank said on Friday that its supervisory board would hold an extraordinary meeting – its second meeting this week – to discuss stress and vulnerabilities in the euro zone’s banking sector.

No guidance

The ECB removed all guidance on further policy moves from its statement and did not provide the usual assessment of whether inflation and growth were more It is possible to rise or rise lower than expected.

In contrast, Kazimir said upside risks dominated, with underlying inflation “sticking stubbornly”.

“There are inflation risks on both sides, but I think the upside risk appears to be much greater,” he said.

ECB President Christine Lagarde told a press conference on Thursday that the eurozone central bank would raise rates if its current forecast holds. range will be greatly expanded.

Core inflation, which excludes volatile food and fuel prices, accelerated to 5.6% from 5.3% in the previous month, suggesting that past energy price increases have filtered through to the broader economy, with inflation Likely to last.



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