The European Central Bank needs to keep raising interest rates because core price inflation remains resilient and risks to the price outlook are skewed towards higher readings, ECB Governing Council member Peter Kazimir said on Friday.
The ECB raised interest rates by 50 basis points on Thursday and projected inflation above its target through 2025, but gave no guidance on further monetary measures, at a time when recent financial market turmoil calls for caution and a data-driven approach.
“Even current events in financial markets do not change my view that we should continue,” Kazimir, governor of Slovakia’s central bank, said in a blog post.
“I am well aware of the sensitivity of the situation, (…) But we haven’t reached the finish line yet.”
Kazimir, however, did not advocate a hike as soon as the next meeting and said it was useless to speculate on the May 4 meeting.
The ECB did not provide its usual assessment of inflation risks, but Kazimir said upside risk dominates and core inflation is “stubbornly resilient.”
Core inflation, which excludes volatile food and fuel prices, accelerated to 5.6 percent last month from 5.3 percent, signaling that previous energy price gains have trickled down to the broader economy and inflation risks becoming durable.
“There are risks to inflation on both sides, but in my view, the upside risks are much greater.”
Still, Kazimir said monetary policy is working and that the ECB’s 350 basis points of rate hikes since last July are starting to pay off.