ECB could hike rates within a year or so, says Holzmann
VIENNA (Reuters) – The European Central Bank could raise rates as early as the end of next year, and halting bond purchases would be a strong signal that the move will come in the next two quarters, said Robert Holzmann , member of the Board of Governors. Wednesday.
The ECB took another step last week in canceling crisis-era stimulus, saying it would end emergency bond purchases in March, but temporarily double the pace of its program longer-term asset purchase (APP) to ease the transition.
“We can reduce or suspend APP purchases that are still in progress, and if that happens, this is a price signal to the markets because we have established that it is only after the suspension or the cessation of purchases as interest rates will be increased, ”said Holzmann. a press conference.
“In an extreme case, it would be possible (…) to suspend buying on a data-driven basis this year and even so to speak for the interest rate hike to take place at the end of this year or at the beginning. next year, around the same time as the third US interest rate hike.
“We’re still a bit later,” Holzmann added, apparently using “this year” to mean 2022.
Holzmann is the governor of the Austrian central bank.
Thursday’s ECB measures were backed by a majority of policymakers, but conservative central bank chiefs in Germany, Austria and Belgium – frequent opponents of the ECB’s easy money policies – are are opposed to it.
The ECB has raised its inflation projections in all areas and now forecasts inflation to 3.2% next year, well above the target, before falling to 1.8% in 2023 and 2024. Several policymakers have questioned these projections, arguing that the bank underestimates the risk of price growth above the 2% target.
“Normally, if we say we don’t need (bond) purchases anymore because our inflation expectation is near or above 2% in 2023 and 2024, then that would certainly be a strong signal that the rate interest will be increased in the following years or the following two quarters, ”said Holzmann.
(Reporting by François Murphy; Editing by Francesco Canepa and Catherine Evans)