The European Central Bank will probably need to keep raising interest rates if markets stabilize, but officials need time to assess the full impact of recent turmoil, according to Governing Council member Pierre Wunsch.
(Bloomberg) — The European Central Bank will probably need to keep raising interest rates if markets stabilize, but officials need time to assess the full impact of recent turmoil, according to Governing Council member Pierre Wunsch.
“If there is stabilization in the market, I think, again, on the basis of the last projection, it’s still clear that we might have more to do,” Wunsch told Bloomberg Television at the “ECB and Its Watchers” conference in Frankfurt on Wednesday. “Let’s take the time — we have another six weeks before the next meeting.”
Wunsch spoke after ECB Christine Lagarde pledged to take a “robust” approach that allows policymakers to respond to inflation risks as needed but also aid financial markets if threats emerge. Officials last week raised rates by a half-point, defying turbulence to keep up the fight to restore price stability.
The Belgian central-bank governor, one of the more hawkish members of the Governing Council, said there’s a possibility that market events might have an impact on lending, helping the ECB’s job in controlling inflation.
“Let’s take some time to look at what the implications are — and if we will see that there are some implications that it has an impact on the economy, for instance, because banks would feel that they need to be a bit more cautious in credit provision,” Wunsch said. “They could be doing part of the job, and we might have to do less.”
He also said that not lifting rates last week would have risked an adverse reaction.
“We had the feeling, you know, if we had not hiked by 50 basis points, people would have said, ‘Ah, they know something we don’t know,’” he said. “We don’t know something that they don’t know. What we know is that what we see, and it’s comforting.”
–With assistance from Max Ramsay and Jana Randow.
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