ECB’s Müller: Wouldn’t Be Surprised if Rates Were Hiked in 2022

24 March 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Madis Müller on Thursday said he wouldn’t be surprised if the ECB ultimately hiked interest rates this year.

In an interview with Politico, Müller, who heads the Estonian central bank, said that ‘[w]e should be careful not to create additional uncertainty in the markets by seeming to waver in our commitment to price stability due to the war in Ukraine. We are not hesitating in our commitment to price stability, which is our main objective.’

For net asset purchases not to end as currently envisaged in 3Q, it would take ‘a dramatic shift in the medium-term outlook for inflation’, he said. ‘Personally, I don't see a high probability’ of that.

‘We shouldn't rule out interest rate hikes in 2022’, he said. ‘I wouldn't be surprised if that will be the case at the end.’ The ECB is ‘pretty much at our target’, which is why policy normalisation must start. Only when interest rates are above zero would there be a ‘more significant’ economic impact from normalisation, he said.

Müller said the euro area’s recovery was unlikely to be thrown completely off course by the Russian war against Ukraine.

The ECB should not ‘distort market signals too much by compressing spreads to a very narrow band, notwithstanding possible changes in the risk outlook for different sovereigns’, he said. Still, he assured that if needed, the ECB could deal with fragmentation. Markets ‘can take comfort in knowing that the ECB in the past has been able to design and deploy quickly new policy tools’, he said.