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MNI BRIEF: ECB Needs More Than Two Rate Hikes - IMF Official

(MNI) LONDON

Mid-2025 "too long" for inflation to stay above target, Alfred Kammer says, as he urges euro area policymakers to raise rates and cut fiscal spending.

The ECB may need to take interest rates above 3.75% if it is to bring inflation back to its target in a timely manner, amid “accelerating” wage rises, an IMF official said Friday, although acknowlwdging fiscal consolidation could shave up to 50bps off the top rate over the next two years.

Euro area rates “still have some way to go," from their present level of 3.25%, European Department Director Alfred Kammer said in a speech. Even allowing for two more 25bps hikes, inflation is currently only seen hitting 2% in mid-2025, a period Kammer described as “too long." (see MNI SOURCES: Most At ECB See 4% Rate As Only Outside Chance).

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The ECB may need to take interest rates above 3.75% if it is to bring inflation back to its target in a timely manner, amid “accelerating” wage rises, an IMF official said Friday, although acknowlwdging fiscal consolidation could shave up to 50bps off the top rate over the next two years.

Euro area rates “still have some way to go," from their present level of 3.25%, European Department Director Alfred Kammer said in a speech. Even allowing for two more 25bps hikes, inflation is currently only seen hitting 2% in mid-2025, a period Kammer described as “too long." (see MNI SOURCES: Most At ECB See 4% Rate As Only Outside Chance).

Keep reading...Show less