ECB Set to Keep Hiking If Projections Hold, De Cos Says

The European Central Bank will have to continue raising interest rates if its latest macroeconomic outlook remains intact following the recent bout of financial-sector stress, according to Governing Council member Pablo Hernandez de Cos.

(Bloomberg) — The European Central Bank will have to continue raising interest rates if its latest macroeconomic outlook remains intact following the recent bout of financial-sector stress, according to Governing Council member Pablo Hernandez de Cos.

“If the baseline scenario in March projections is confirmed, we will still have ground to cover to make sure inflation is stamped out,” he told Bloomberg’s New Economy Gateway Europe conference outside Dublin.

De Cos, who also heads Spain’s central bank, said the size of the next move will hinge on incoming data and the implications for inflation. “How many hikes and the magnitude of these hike will depend on this assessment,” he said Wednesday.

The ECB is widely expected to raise rates again on May 4, though the pace of tightening remains in doubt as other global central banks approach the end of their hiking cycles.

A key question is over underlying inflation — a price gauge that excludes volatile items like food and energy. The measure has remained stubbornly high even after officials lifted borrowing costs by 350 basis points since last July. Data for April are due two days before the ECB next sets rates.

De Cos said the ECB’s monetary policy will depend on “how the numerous and different sources of risk, related to financial market developments in the past weeks, materialize.”

While discord among rate-setters has grown of late, he still sees decisions being backed by strong majorities.

“In very difficult moments we always reach a very broad consensus,” de Cos said. “My expectation is for this to last in following quarters.”

(Updates with more from de Cos in last three paragraphs.)

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