ECB’s Holzmann argues again for rate rise – paper

ZURICH — European Central Bank (ECB) policymaker Robert Holzmann told an Austrian newspaper that the bank could send a clear message about fighting inflation by raising interest rates before ending its stimulus program of bond purchases.

The ECB left rates steady this month and will be in no hurry to raise them, President Christine Lagarde said on Thursday.

Holzmann, governor of Austria’s central bank, supports the majority decision of the ECB, the Krone paper cited him as saying, but he added: “The system of bond purchases is difficult for the population to understand. An interest rate increase would have been a signal that everyone would have understood.”

Holzmann had also challenged the bank’s long-held view about the sequencing of its policy moves last month.

He said in the Krone interview published on Saturday that the euro zone economy would have been on a “wonderful growth path” if not for the war in Ukraine.

Asked if he was worried about the high level of debt in some countries, he said: “This topic is taken very seriously by the Euro Group but, as is known, there are different ways of looking at it.”

Simply cutting government spending would not be enough without structural changes as well, he said, noting the challenge of promoting growth that can create sufficient financial leeway while still combating the climate crisis.

“This transition, even more so in the middle of a crisis, costs money. A lot of money. It makes sense to develop new renewable energy sources, but it does not come for free,” he said.

The paper paraphrased Holzmann as saying he expected inflation to drop to the targeted 2% in the medium term or else appropriate interest rate steps would have to be taken. (Reporting by Michael Shields; Editing by David Clarke)