Slovak Central Bank President and ECB Council member Petr Casimir has spoken out in favor of continuing the ECB’s restrictive monetary policy, thus joining the camp of particularly hardline hawks.
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European Central Bank (ECB) Governing Council member Peter Casimir has joined the chorus of hawks on the ECB’s Governing Council, dismissing claims that slowing inflation will soon justify rate hikes, according to a Bloomberg report. “We still need to make two more moves in interest rates of 50 basis points,” said Casimir, who heads the Slovak Central Bank and pledges to complete the monetary tightening cycle by summer. Declining inflation for two consecutive months is positive news. But there is no reason to slow down the pace of rate hikes.”
The drop in single-digit inflation in the eurozone, coupled with a weather-related drop in energy costs, has reportedly prompted some policymakers to consider slowing the pace of rate hikes by half a point after next month’s move.
On the other hand, the Greek “dove” wants cheap money
Greece’s central bank governor Yannis Stournaras, a dovish advocate, also endorsed that view on Monday. “The adjustment of interest rates should be more gradual, taking into account the slowdown in growth in the eurozone and the smooth transition of monetary policy in each country,” he said in an interview with Kathimerini newspaper.
Ignazio Fiesco of Italy, while acknowledging the need to continue normalizing monetary policy, also urged a gradual pace. In Rome he said he was “not convinced that it is better at present to risk strife than to strait”.
Lagarde Affirms the ‘Political Mantra’
However, the idea of slowing down the pace encounters great resistance. After calling in December to raise borrowing costs by 50 basis points in February and possibly that much again in March, President Christine Lagarde said in Davos last week that her “political mantra” was to stay the course.
Klaas Knot wants a big double move
Dutch central bank governor Claes Nott went further. He wants at least two more steps of half a point each and said over the weekend that the deceleration time is “still a long way off”. Finland’s central bank governor Olli Rehn has called for “significant” steps in late winter and early spring.
Her French counterpart on the ECB’s governing council, François Villeroi de Gallau, said it was too early to speculate on March’s decision, although like Casimir he advocates for the increases to end by summer.
Now that headline inflation has peaked, central bankers are focusing on core inflation with the exception of energy and food costs, which hit new highs last month.
Casimir said he supports the change. “In my view, the most telling trend at the moment is core inflation,” he said in a statement on the central bank’s website. “Their development underscores the need to continue on the path we have taken.” (aa)
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