ECB requires numerous more rate walkings, Bundesbank chief Nagel states By Reuters

© Reuters. SUBMIT IMAGE: Joachim Nagel, President of Germany’s federal reserve Bundesbank attends to the media throughout the bank’s yearly press conference in Frankfurt, Germany March 1, 2023. REUTERS/Kai Pfaffenbach

FRANKFURT (Reuters) – The European Central Bank will require to raise rates of interest “several” more times and after that should hold rates stable for a long time prior to inflation is totally tamed, Bundesbank President Joachim Nagel stated on Tuesday.

The ECB has actually raised rates by a combined 375 basis points given that last July and guaranteed additional policy tightening up to fight runaway rate development, however many policymakers concur that the reserve bank is now in the last of policy tightening up after the fastest rate walkings in its 25-year history.

“Monetary policy tightening has not yet reached its end,” Nagel stated in a speech. “Several more interest rate steps will be needed to reach a sufficiently restrictive level, and we will then have to maintain this level for a sufficiently long time until inflation has fallen sustainably.”

On Monday, French reserve bank chief Francois Villeroy de Galhau stated that rates are most likely to peak by the end of this summer season and the essential problem is simply for how long they will require to remain high.

The issue is that inflation is still performing at 7%, more than 3 times the ECB’s 2% target, and a significant downturn, especially for core items, might not come up until the fall.

That would recommend that 2 or 3 more rate walkings might be required, putting the ECB’s deposit rate at 3.75% or 4.00% by the end of September.

“Rest assured that I will not let up until price stability is restored,” Nagel stated. “Our medium-term goal is 2%, no more and no less. And we want to achieve this goal in the near future.” 

Markets presently are pricing in another 2 25-basis-point walkings and see a rate cut in early 2024, an expectation some ECB policymakers have actually pressed back versus.


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