Reuters
Published Apr 05, 2022 04:09PM ET
FRANKFURT (Reuters) - The European Central Bank could raise interest rates back to zero already this year to fight high inflation, Belgian central bank chief Pierre Wunsch said in a magazine interview, joining a growing group of policymakers now openly discussing a rate hike.
The ECB has kept rates in negative territory since 2014 and has not raised them in more than a decade, but a surge in inflation is now making an increase in the minus 0.5% deposit rate increasingly topical.
"Based on the current outlook, so with positive economic growth, we will raise interest rates to 0 by the end of the year," Wunsch told Belgian magazine Knack. "It's actually a no-brainer for me."
"But I have to say that even within the ECB there has been no discussion about raising interest rates," he added.
Inflation hit a record high 7.5% last month on surging oil prices, but some policymakers still argue that underlying trends are weak and price growth could slip back below the ECB's 2% target over the medium term.
Wunsch took a different view, arguing that the target, even further out in time, has essentially been met, so it is time for the ECB to roll back extraordinary stimulus.
He also said that rates could eventually peak at 1.5% or 2%, above the 1% anticipated by markets.
The central bank governors of Germany, the Netherlands and Austria, all considered among the most conservative on the rate-setting Governing Council, have also made the case for a rate hike in recent weeks, suggesting that a discussion about a move will soon be on the agenda.
Wunsch added that Belgium could suffer a recession if it lost access to Russian gas, but that was still a relatively minor price to pay in the current environment.
"That's not too bad when I see what is happening in Ukraine," he said. "Even a temporary recession is really just a detail compared to the economic downturn in Ukraine and the thousands of deaths that have already occurred there."
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.