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MNI BRIEF: ECB Pause Correct, But Vigilance Needed - Holzmann

(MNI) Vienna

The decision to pause ECB rate hikes at 4.0% in October was “definitely” the right one, and was supported by a “full majority” of Governing Council members, Austrian National Bank governor told MNI and others Monday, but possible upwards pressures on energy and food prices mean further rate hikes cannot be ruled out.

Robert Holzmann warned against reading too much into October’s flash headline inflation figure, which came in lower than expected at 2.9%. “We had a surprise last time, the month before we had a surprise in the other direction,” he said. “If inflation comes down it depends month to month what kind of base effects we have.

Rate cuts will come eventually, “but for the time being I don’t see it,” he said. Middle East instability could “easily” lead to rising energy and food prices, he continued, with the latter vulnerable to price increases of up to 8% over 12 months under the worst-case scenario.

Europe's economy is struggling to get into positive growth territory, while risks to the outlook seen to the downside. However Holzmann said he was less concerned about the outlook for GDP than the fiscal and political decisions taken by some member states.

MNI London Bureau | +44 20 3983 7894 |
MNI London Bureau | +44 20 3983 7894 |

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