DUBLIN- The European Central Bank will likely increase interest rates by smaller increments next year if further hikes are needed, governing council member Gabriel Makhlouf was quoted as saying on Sunday.
The ECB began to push up rates at its fastest pace on record in July and markets are betting on a 50-75 basis-point increase at the next Dec. 15 meeting. Makhlouf said this week that his mind is open on the size of that hike.
While policymakers have been adamant that rates need to increase further to help lower inflation, the account of their last meeting published on Thursday showed they cannot fully agree on their ultimate destination or pace.
“When we get into next year, the likelihood is that if the rates go up, they’ll go up by smaller increments,” Makhlouf, the Irish central bank chief, told Ireland’s Sunday Independent newspaper in an interview.
“Then we’ll have to see what’s happening to the euro area economy – so we can judge how much more we need to do. And over what pace do we need to do it… I think by the second half of next year we’ll see it (inflation) lower.”
The next increase in interest rates by the European Central Bank could be smaller than the record 75 basis-point-hikes decided at its last two meetings, policymaker Mario Centeno said last week.
With the inflation rate in double digits, the ECB has raised interest rates by 200 basis points in just three months from record low levels.
Speaking at a conference in Lisbon, Centeno said the ECB had to reverse the trend of rising inflation and could not let it become entrenched in the economy.
Asked whether he thinks the ECB should raise interest rates by less than 75 basis points, Centeno said: “I don’t like to talk about increases before (meetings)…(but) I think there are many conditions for the rates increase to be less than that number”.
