Further rate hikes are warranted by persisting inflation in the eurozone, according to members of its monetary authority’s decision-making body. Two central bank governors, with different opinions about how aggressive the European Central Bank should be, nevertheless agree that more increases of key interest rates are yet to come.

ECB Has Some Hikes Left to Make, Bank of France Chief Admits

Although the European Central Bank (ECB) has done most of the work in terms of interest rate hikes, it still has a “little way to go,” Banque de France Governor Francois Villeroy de Galhau said on Wednesday, quoted by Reuters. It’s not the first time Villeroy has prepared the public for what’s to come.

After the fastest ever rate raising during the past year, the ECB is now considering whether to slow down the increases. The next decision is expected in early May, when policymakers will determine how much higher than 3% the deposit rate needs to be to bring inflation down to the 2% target.

“We may possibly still have a little way to go on rate hikes at our next meetings, though I think it’s premature to decide now what we will do in May,” Villeroy said in a speech in Washington. He made a similar statement in an interview at the end of March.

The head of the French central bank, who is a member of ECB’s Governing Council, believes most of the rate hiking has been done already and argues that the biggest impact will come from previous rate increases. The tightening can stop once inflation starts turning around, he insisted, elaborating:

A turnaround in the trajectory of underlying inflation – be it actual or expected with sufficient certainty – should be a trigger for stabilizing our rates.

Inflation Outlook Warrants 50 Bps Increase, Austria’s Hawkish Central Bank Governor Says

Since July, 2022, the ECB has raised interest rates by 350 basis points (bps) including three back-to-back 50 bps increases, but it has not provided any clear indication yet about the potential outcome of its upcoming meeting on May 4, Reuters noted in a separate report.

Oesterreichische Nationalbank Governor Robert Holzmann, who also sits on the ECB’s 26-member Governing Council, told the German press that the eurozone’s monetary authority needs to keep raising interest rates. In an interview with the Boersen Zeitung newspaper, he insisted:

The persistence of inflation currently argues for another 50 basis points.

“There is a great deal of common understanding in the ECB Governing Council that we have not yet reached the end,” Holzmann revealed. “We must continue to act decisively and continue to raise key interest rates noticeably even beyond May,” added Austria’s chief banker who is considered a hawk among the Council’s members.

Expectations for further rate increases were recently highlighted by two other members of the Council — the Governor of the Croatian National Bank, Boris Vujčić, and his colleague at the helm of Bank of Slovenia, Boštjan Vasle. Core inflation is clearly on an upward trend, Vasle was quoted as saying while Vujčić acknowledged that more hikes may follow.

By how much do you expect the ECB to raise interest rates in May? Share your forecasts in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.