VIENNA (Reuters) – The European Central Bank must remain vigilant on inflation and be prepared to raise interest rates again if needed, its policymaker Robert Holzmann said on Monday, warning that rates would not be cut anytime soon.
At its last meeting on Oct. 26 the ECB left interest rates unchanged, ending an unprecedented streak of 10 consecutive rate hikes, and insisted that market talk of rate cuts was premature.
“I definitely belong to those that think we should be very careful, that we should stand ready again to hike if needed, and certainly don’t declare victory too early on,” Holzmann told reporters on the sidelines of a conference, adding: “We need to stay vigilant.”
The ECB has lifted rates by a combined 4.5 percentage points since July 2022 to combat runaway price growth but is now pausing as record-high borrowing costs are starting to work their way through the economy.
Financial markets are now ramping up expectations for interest rate cuts from the ECB, betting it will be the first major central bank to ease policy to buffer a euro zone economy facing recession, in contrast to a robust United States.
Holzmann, however, sought to cool expectations there.
“Don’t expect any reduction of the rates soon. Eventually it will happen but for the time being I don’t see it,” said Holzmann, who heads the Austrian National Bank.
Asked if he was worried about the growth outlook, he said: “Not really, because you have to think that we increased rates by 450 basis points in Europe and despite this major rise we still have stagflation, so it could be much, much worse. So given this one we are in pretty good shape there.”
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