ECB's Vasle Says High Underlying Inflation and New Forecasts Motivated 50BP Hike

17 March 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – European Central Bank Governing Council member Boštjan Vasle stated on Friday that the ECB's 50bp rate hike on Thursday was motivated by high core inflation data and the new forecasts showing prolonged inflation pressures.

In an statement on the website of the Bank of Slovenia, which Vasle heads, he said, '[t]he decision [to raise all three key ECB interest rates by 50bp on Thursday] is based on current data on still high underlying inflation and new forecasts, which suggest that inflation will remain elevated this year and next.'

He repeated the ECB's language from Thursday that policymakers were 'closely monitoring the current market tensions and standing ready to react as necessary to preserve price stability and financial stability in the euro area.'

The ECB was ‘monitoring particularly closely the heightened uncertainty in the international financial markets, with the banking system in the euro area and also in Slovenia remaining robust’, he said.

Regarding the banking sector, he said that 'as in the euro area, the Slovenian banking system remains resilient to systemic risks, and its liquidity remains high.'

'In light of the major uncertainties on the financial markets in recent days, especially in the US and Switzerland, we stress that the Bank of Slovenia has prepared adequately for such risks,' he added.

He noted that monetary policy transmission was not uniform, explaining that although 'interest rates on new loans have already adjusted to the new key rates across the euro area,' the high liquidity of banks and the high deposit base had led monetary policy decisions to affect deposit rates to a lesser extent, especially in Slovenia.