ECB’s Stournaras: Latest Rate Hike May Hurt Growth and Employment

9 September 2022

By David Barwick – FRANKFURT (Econostream) – Thursday's 75bp hike by the European Central Bank could entail sacrifices in terms of economic growth and employment, ECB Governing Council member Yannis Stournaras warned on Friday.

According to talking points prepared for his participation in a Eurofi conference, Stournaras, who heads the Bank of Greece, said that monetary policy 'keeps expectations anchored and second-round effects under control.'

'This is why we took this front-loaded step yesterday increasing our key interest rates by 75 basis points, despite the fact it may have a cost in terms of output and employment', he said.

The ECB would like to approach what its models say is the neutral rate of interest, which 'may be around 1.5%, or even 2%', he said.

Stournaras, who in an interview with Econostream the week before the Governing Council meeting had stressed the importance of not destabilising growth, issued another warning on this count.

'We have started normalising, and it is a serious normalisation', he said. 'It should not be taken lightly. We may have large losses in output and we should be cautious.'

He reiterated the view that there were no signs yet of second-round effects and that wage developments were contained.