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ECB will need more rate hikes to fight off inflation, De Cos Says

The European Central Bank “will need additional interest rate increases” to fight off inflation even considering the growing likelihood of a euro zone recession, policymaker Pablo Hernandez de Cos said.

“But to what level and how fast will depend on the inflation outlook, which, in turn, depends on the growth outlook and therefore includes the higher probability of recession that we are now estimating,” De Cos, who also heads the Bank of Spain, said in a statement.

De Cos said that after a significant slowdown of growth in the third quarter, “we expect a further weakening for the remainder of the year and in the first part of 2022” in the common currency area.

While the bank last week dropped the reference in its policy statement to likely rate hikes at “several” more meetings, ECB President Christine Lagarde appeared to revert back to this terminology after raising the deposit rate on Oct. 27 by 75 basis points to 1.5%, its highest level since 2009.

Inflation in the euro zone accelerated to 10.7% in October and is expected to stay above the ECB’s 2% target through 2024.
Source: Reuters

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