People familiar with the matter said that ECB policymakers are building a consensus on raising interest rates by one yard in May.
(Reuters file photo)
[Financial Channel/Comprehensive Report] According to five people with direct knowledge of the discussions, European Central Bank (ECB) policymakers are building a consensus on raising interest rates by 1 yard (0.25 percentage points) in May, but other options are still under discussion. The debate is still unresolved.
"Reuters" reported that the European Central Bank raised interest rates by at least 2 yards (0.5 percentage points) in 6 consecutive meetings to combat stubborn high inflation, which is the fastest growth rate since records began.
But people familiar with the matter mentioned that there are many factors now supporting more cautious decision-making.
Uncertainty remains high given the volatility in the financial sector last (March) and interest rate hikes over the past period have yet to play a role in the economy, so the reduction is needed, the people said.
The end of rates will soon be seen, and the last mile will be safer in smaller steps.
Please read on...
Discussions are ongoing and the outlook could still change, the people familiar with the matter said, notably April inflation data and the ECB's quarterly survey of bank lending, both due two days before the May 4 policy meeting .
An ECB spokesman declined to comment on policy discussions.
According to people familiar with the matter, a small number of people advocate no change in May, most of them are southern European decision makers who do not support a 2-size increase in last (March), while a small number of people advocate another 2-size increase.
So far, only a few policymakers have publicly commented on the possibility of the ECB's next move. Dutch central bank president Klaas Knot said it was still unclear whether a 2-yard increase was necessary or whether 1 would be enough; Peter Kazimir said that the ECB may slow down rate hikes; Austrian central bank president Robert Holzmann supported another 2 yard increase.
The market currently expects to raise interest rates by 1 yard each in May and June.
People familiar with the matter deduce that a rate hike is necessary because headline inflation remains too high and core inflation, which excludes volatile food and energy prices, is likely to rise for a few more months, so any pause in rate hikes would be a release wrong signal.
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