we need to raise rates by 50 bps in September By Reuters


© Reuters. FILE PHOTO: Slovakia’s Peter Kazimir attends the Asian Financial Forum in Hong Kong as finance minister, China January 15, 2018. REUTERS / Bobby Yip / File Photo

(Reuters) – The European Central Bank needs to speed up the pace of interest rate tightening to 50 basis points in September after an initial hike of 25 basis points in July, Slovak Governing Council member Peter Kazimir said on Monday.

“The summer is not the end of anything, just the beginning,” Kazimir said in emailed comments. “In the autumn, concretely in September, we will continue with raising rates and here I clearly see the need to accelerate the pace and deliver an increase by 0.50%,” he said.

The ECB flagged a 25 basis point interest rate hike in July and said a bigger increase may be needed in September as inflationary pressures were increasing and broadening, raising the risk that high price growth will become entrenched.

“From my point of view, it is more reasonable to act preventively than scratch our heads behind why we lingered,” Kazimir, governor of the Slovak central bank, said.

“Incoming data just reassure me that there is no reason to hesitate. Negative interest rates must be the past in September.”

The ECB now sees inflation at 6.8% this year, more than three times its target, and price growth could hold above 2% through 2024, raising the risk that businesses and households lose trust in the bank’s commitment to price stability.

Kazimir said inflation would remain high for some time, including in double-digits in Slovakia next year.

He said the ECB’s tightening was coming as the economy was slowing down.

“Regardless of the current setting of monetary policy there are quarters of weak growth ahead of us, possibly even a temporary period of a slight decline in some euro zone countries,” Kazimir said.



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