Robert Holzmann, a member of the European Central Bank and the President of the Austrian Central Bank, said that the ECB may increase interest rates without ending its bond purchases and that there may be two rate hikes this year.
Answering NZZ’s questions, Holzmann said he predicts the ECB will reassess the inflation situation at its Governing Council meeting in March. Holzmann said, “The faster termination of all bond purchase programs and the increase in interest rates before the end of this year will definitely be among the topics to be discussed,” and reminded that French Central Bank President Villeroy pointed out that bond purchases will be completed at the end of the third quarter.
Stating that the ECB has always signaled that the rate hike should start soon after the bond purchases end, Holzmann said, “However, it is possible to make the first rate hike in the summer, before the bond purchases end, and the second increase at the end of the year, I prefer it.” used.
Stating that ECB members should be in a clearer communication about which direction the interest rates should go, Holzmann said, “The neutral interest rate is currently -0.5 percent. Taking this value and adding the ECBD’s 2 percent inflation target gives the nominal value of the break-even interest rate as 1.5 percent. To me, there should be a roadmap for where those 1.5 percent interest rates should go. When this value is reached, our interest policy becomes neither expansionary nor neutral. However, we have to be in open communication with market participants on this issue.”