Europe Approaches End of Interest Rate Hikes... ECB Says "Ending Soon"

ECB Official Expects Interest Rate Hikes to End Soon
Eurozone CPI Shows Slowdown from November
Forecast Predicts Additional 2.45%P Increase

Since last July, the European Central Bank (ECB), which raised its key interest rate six consecutive times, is strongly expected to soon halt further rate hikes. This is based on the judgment that the ECB has raised rates sufficiently to curb inflation, which had peaked as consumer price index (CPI) growth in Europe slowed down.

On the 5th (local time), Bloomberg reported that key ECB officials, including Fran?ois Villeroy de Galhau, Governor of the Banque de France and a member of the ECB Governing Council, are strongly anticipating a pause in rate hikes.

In an interview with the German media Frankfurter Allgemeine Zeitung on the 31st of last month, Governor Galhau stated, "We have mostly completed the necessary financial tightening to curb inflation," adding, "There is only a little way to go (in terms of rate hikes) ahead."

European Central Bank (ECB) [Image source=Yonhap News]

According to Bloomberg, Yannis Stournaras, Governor of the Bank of Greece, also commented on the ECB’s key interest rate hikes on the 2nd, saying, "It feels like we are now approaching the final stage. While I cannot definitively say it’s the end, the conclusion is certainly near."

Boris Vuj?i?, Governor of the Croatian National Bank and a member of the ECB’s monetary policy committee, said on the same day that although there is still room for rate hikes to control inflation, "the largest part of the rate hikes that began last July to curb inflation has already passed."

Additionally, Bloomberg reported that Robert Holzmann, an ECB policymaker who previously made hawkish remarks suggesting the Eurozone’s key interest rate could reach up to 4.5%, is now leaning toward the view that the ECB will only raise rates slightly.

Since last July, the ECB ended the era of negative interest rates after 11 years and raised the key interest rate, which had remained at 0%, to 3.5% over six hikes.

Following the consecutive rate hikes, the inflation rate in the Eurozone peaked at 10.6% in October last year and has been declining since November. The inflation rate dropped to 6.9% in March.

However, despite this trend, the market views several small additional rate hikes as inevitable. This is because the core inflation rate in March, which excludes volatile items such as energy and food, rose 5.6% year-on-year, an increase from the previous month’s 5.3%.

In a Bloomberg survey of market experts regarding the ECB’s monetary policy outlook, most respondents predicted that the European key interest rate could rise by an additional 2.45 percentage points.

Ralph Solveen, Chief Economist at Commerzbank, told Dow Jones, "European inflation will fall to 5% by the end of 2023, but the ECB will need to raise rates at least twice more."

This content was produced with the assistance of AI translation services.