Hike rates

Vasle says ECB may have to hike rates into restrictive territory

(Bloomberg) – The European Central Bank may have to raise borrowing costs to a level that is holding back economic growth, Governing Council member Bostjan Vasle.

“High inflation and the reasons behind it call for further normalization of monetary policy,” Vasle said Monday in Ljubljana, adding that the ECB must “continue to gradually raise rates, even in the territory where monetary policy will not simply be neutral, but will become more restrictive.

The ECB has already raised rates by 200 basis points since July and is expected to raise them again at its next meeting on December 15. the deposit rate close to the so-called neutral level, considered neither incentive nor restrictive.

ECB chief economist Philip Lane said in an interview published earlier on Monday that officials would continue to increase next year, although he stressed that “the more relevant argument than knowing s ‘to take a break is to move on to smaller increases at the appropriate time’.

Vasle, who heads Slovenia’s central bank and is among the most hawkish officials, said rate hikes aren’t the only tool the ECB should deploy to fight inflation, pointing to “other measures” , in particular the reduction of the balance sheet.

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