Central Bank governor Gabriel Makhlouf says he expects the ECB to make two further interest rate hikes in the coming months and for rates to remain elevated for longer than markets anticipate
Debate has now shifted to where the tightening should end in the fight to get the euro zone’s inflation back to the ECB’s 2 per cent target rate.
“Once we’ve reached what I would describe as the top of ladder of increasing interest rates, we’re likely to stay there for a while,” he said, dampening speculation that the ECB could cut rates by the end of the year if inflation keeps falling. “Vulnerabilities built up in segments of the global financial system during a decade of low interest rates have been exposed, as evidenced most forcefully by the failures in March of a number of US banks and Credit Suisse,” it said.
“The banking system has capacity to absorb potential future shocks, while banking sector profits continue to grow due to higher interest rates,” it said.
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