The European Central Bank could raise interest rates back to zero this year to fight high inflation, Belgian central bank chief Pierre Wunsch said in a magazine interview, joining a growing group of policymakers now openly discussing a hike. of types.
The ECB has kept rates negative since 2014 and hasn’t raised them in over a decade, but a spike in inflation is making a deposit rate hike, which is currently at -0.5%, increasingly discussed.
“Based on the current outlook, ie with positive economic growth, we will raise interest rates to 0 by the end of the year,” Wunsch told Belgian magazine Knack. “Actually, it’s a no-brainer for me.”
“But I have to say that even within the ECB there has been no talk of raising interest rates,” he added.
The inflation reached a record 7.5% last month, due to the increase in oil pricesbut some monetary policy makers continue to argue that underlying trends are weak and that price growth could return to below the ECB’s 2% target over the medium term.
Wunsch took a different view, arguing that the even longer-term goal has essentially been met, so the time has come for the ECB to scale back extraordinary stimulus.
He also said rates could top out at 1.5% or 2%, above the 1% expected by markets.
The governors of central banks Germany, the Netherlands and Austria, all considered among the most conservative on the Governing Council that sets rates, have also advocated a hike in recent weeks, suggesting that it will soon be discussed.
Wunsch added that Belgium could suffer a recession if it loses access to Russian gas, but that was a relatively lower price in the current environment.
“That’s not so bad when I see what’s happening in Ukraine,” he said. “Even a temporary recession is really a detail compared to the economic downturn in Ukraine and the thousands of deaths there.”