(Bloomberg) — European Central Bank Governing Council member Peter Kazimir joined a chorus of fellow hawks in rejecting suggestions that moderating inflation will soon warrant smaller interest-rate increases.
“We need to deliver two more 50 basis-point moves,” said Kazimir, who also heads Slovakia’s central bank and favors the monetary-tightening cycle being completed by the summer. “The fall in inflation for two months in a row is positive news. But there’s no reason to slow the pace of rate hikes.”
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The retreat in euro-zone price gains back to single digits, alongside a weather-induced plunge in energy costs, is prompting some officials to consider reducing the pace of rate hikes after next month’s planned half-point step, people familiar with their thinking have told Bloomberg.
Also speaking Monday, Greece’s dovish central bank chief Yannis Stournaras supported that notion.
“The adjustment of interest rates needs to be more gradual, taking into account the slowdown in euro-area economic growth, taking into account the smooth transmission of monetary policy in each country,” he told the Kathimerini newspaper in an interview, according to an emailed transcript.
While conceding that policy normalization must continue, Italy’s Ignazio Visco also urged a gradual pace. He said in Rome that he’s “not convinced that today it is better to risk tightening too much instead of too little.”
The idea of slowing down is triggering considerable pushback, however. After calling in December for borrowing costs to be lifted by 50 basis points in February, and possibly by that amount again in March, President Christine Lagarde said last week in Davos that staying the course is her “policy mantra.”
Dutch central bank chief Klaas Knot has gone further. He wants at least two more half-point steps, saying at the weekend that the time to slow the pace is “still far away.” Finland’s Olli Rehn backs “significant” moves in the late winter and early spring.
Their French colleague on the Governing Council, Francois Villeroy de Galhau, has said it’s too soon to speculate on March’s decision, though like Kazimir he supports the increases ending by the summer.
With headline inflation seemingly having peaked, officials have switched focus to the underlying gauge that excludes energy and food costs and which edged up to a fresh high last month.
Kazimir said he supports that shift.
“What’s currently the most authoritative from my point of view is the core-inflation trend,” he said in a statement on the central bank’s website. “Its development confirms the need to continue on the path taken.”
—With assistance from Sotiris Nikas, Vassilis Karamanis and Alessandro Speciale.
(Updates with Italy’s Visco in sixth paragraph.)