ECB’s Müller: 50BP March Rate Hike Likely, Based on Current Knowledge
3 February 2023
By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Madis Müller on Friday said that the ECB was likely to repeat yesterday’s 50bp rate hike next month, according to currently available information.
In a blog post on the website of the Estonian central bank, which he heads, Müller wrote that ‘[b]ased on current knowledge, it is also clear that there will probably be an equally large interest rate increase in March.’
According to Müller, another 50bp of tightening was needed to ‘break the backbone of the too fast price increase and overcome the naturally more persistent pressures that are still raising the price level.’
It could not be assumed that an economic slowdown would by itself bring inflation under control, he wrote, in particular given the retreat of energy prices and better-than-anticipated economic prospects.
By not hesitating to hike interest rates sufficiently now to restore price stability, central banks may avoid the need to tighten monetary policy even more later, he said.
Despite an improved outlook and lower headline inflation, prices are still rising too fast and near-term economic prospects are less encouraging, he said.
‘Speaking of rapid price increases, there are signs of concern that the more permanent part of the price increase, i.e. core inflation, shows no signs of abating’, he wrote.