ECB’s Stournaras opposes big rate move, calls for prudence
1:52 pm Tuesday, August 30th, 2022
ALPBACH, Austria (Reuters) -The European Central Bank (ECB) needs to keep raising interest rates but there is no need for a big move and the bank should instead follow a prudent, careful approach to normalisation, Greek central bank chief Yannis Stournaras said on Tuesday.
The comments are among the first pushing back on calls for a big rate increase with markets now split between a 50- and 75-basis-point hike at the ECB’s Sept. 8 meeting after hawkish comments from a host of policymakers.
“There is no need to take very large steps,” Stournaras told a conference. “Gradual normalisation will be appropriate.”
He also said that in his estimate, the neutral rate – where the ECB was neither stimulating nor cooling growth – was between 0.5% and 1.5%, so the deposit rate, now at zero, was not too far away.
Most other policymakers put the neutral rate somewhat higher, with estimates centered around 1.5%.
Stournaras also predicted that inflation would peak this year then decline in 2023 before moving towards the ECB’s 2% target the following year.
Inflation is likely to have hit 9% this month and could still head into double digit territory later this year on high natural gas prices that will likely eat into consumption and could push the euro zone into recession.
“In my view, this year, we will see the peak of inflation and a steady deceleration thereafter, inflation will gradually decline in 2023 and converge towards the target in 2024,” Stournaras told the conference.
(Reporting by Balazs Koranyi; Editing by Angus MacSwan and Emelia Sithole-Matarise)
