ECB policymakers warn over risk of further hikes
FRANKFURT (Reuters) -Euro zone inflation is stubbornly high with upside risks, so the European Central Bank's next move could still be a rate increase before cuts come onto the agenda, several policymakers said on Thursday.
The ECB has raised its deposit rate at each of its past 10 meetings, to a record-high 4% last week. But it signalled it would pause in October, leading markets to price out the chance of any further hikes on the premise that weak growth would dissuade policymakers from tightening.
«Have we reached the plateau (in interest rates)? That is not yet clear,» German Bundesbank President Joachim Nagel told a banking conference on Thursday.
«The inflation rate in the euro zone is also not moving toward 2% at the desired pace… (and) core inflation remains stubbornly high and is expected to fall only gradually.»
Belgian policymaker Pierre Wunsch argued that the risk of a hike is still significant, even if he was becoming more comfortable with the ECB's own projections, which show price growth back at target by the end of 2025.
«The risk that we would have to do more is significant,» Wunsch told the Reuters Global Markets Forum. «I'm not sure we should put a number on it, but it's certainly more than 10% and I think it's not that far from 50%.»
Martins Kazaks, Latvia's central bank chief, meanwhile argued that a recent rise in energy prices creates an upside risk for inflation.
«The recent oil price increase in my view is not a temporary or transitory, it's very much a structural issue,» Kazaks said. «This does create upside risks in my view for inflation.»
Brent crude prices are up by a quarter in the past three months while natural gas costs have also surged, though that is partly due to aggressive efforts
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