VIENNA (Reuters) – Governing Council member Robert Holzmann said the European Central Bank could raise interest rates as soon as the end of next year and that a call to end bond purchases would be a strong signal that a move is coming in the next two quarters. Wednesday.
The European Central Bank last week took another step back from crisis-period stimulus, saying it would end emergency bond purchases in March, but temporarily double the pace of its Long-Term Asset Purchase Program (APP) to smooth the transition.
“We can reduce or suspend APP purchases that are still pending, and if that happens, it is a price signal for the markets because we have proven that only after suspending or stopping purchases will interest rates go up,” Holzmann said. Press Conference.
“In extreme cases, it will be possible…to suspend purchases in a data-dependent manner this year and even if we talk about an interest rate hike at the end of this year or early next year, around the same time as the third rate hike in the US.
“We’re always a little late,” added Holzmann, apparently using the phrase “this year” to mean 2022.
Holzmann is the governor of the Austrian Central Bank.
Thursday’s ECB actions were supported by a majority of policy makers but conservative central bank heads from Germany, Austria and Belgium – repeated opponents of the ECB’s easy money policies – objected.
The European Central Bank raised its inflation forecasts across the board and now sees inflation at 3.2% next year, well above the target, before falling to 1.8% in both 2023 and 2024. Many policymakers questioned these forecasts, arguing that The bank reduces the risk of stabilizing price growth above the 2% target.
“Usually if we say we don’t need more[bond]buying because our inflation expectations are close to 2% or higher than in 2023 and 2024, that would certainly be a strong signal that the interest rate will go up in the following,” Holzman said: in the next two quarters.
(Reporting by François Murphy; Editing by Francesco Canepa and Catherine Evans)