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The
ECB raised its deposit rate to a record high 4% last week and
hinted at a pause, raising expectations in the market that its
next move will be a cut, possibly as soon as late spring 2024.
"Only the March forecast can confirm that we are heading
unequivocally and steadily towards our inflation goal," Kazimir
said in an opinion piece. "That is why I cannot rule out the
possibility of further rate increases today."
Kazimir was one of the few policymakers in the run up to the
September policy meeting to openly call for a rate hike, arguing
that underlying inflation continues to simmer and was at risk of
getting stuck above the target.
He added that even if the ECB was at the so-called terminal
rate, or the peak in interest rates, the bank would need to
chart steady course for an extended period.
"Assume we're (already) at the top. If so, we may have to stay
camping here for quite some time and spend the winter, spring
and summer here," Kazimir said.
"It is, therefore, premature to place market bets on when the
first interest rate cuts will occur," he added.
The end of rate hikes would also start a new phase of the policy
discussion and policymakers would then need to debate what to do
with the bank's two bond purchase schemes, the Pandemic
Emergency Purchase Programme (PEPP) and the Asset Purchase
Programme (APP).
Maturing debt in the PEPP is scheduled to be reinvested until
the end of 2024 and some policymakers say this end date should
be revisited. Others meanwhile argue that bonds in the APP could
now be sold off.
"As soon as incoming economic data and analyses confirm that
further tightening is unnecessary, I see room for a debate about
adjusting the pace of our quantitative tightening," Kazimir
said.
(Reporting by Balazs Koranyi; Editing by Toby Chopra)
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