MNI BRIEF: Stability Not Yet Reason To Slow Hikes - Wunsch

Monetary policymakers need to see what the effect of recent market turmoil will be before making their next rate-setting decision, Bank of Belgium governor Pierre Wunsch told the ECB Watchers conference in Frankfurt on Wednesday, but early signs indicate there is no immediate threat of widespread financial instability.

"We've been torturing the data in all directions, and honestly we do not see any problem," Wunsch, considered a monetary policy hawk, said. He backed ECB president Christine Lagarde's earlier statement that there need not be a trade-off between price stability and financial stability, and said the Governing Council should rely "as much as possible" on tools other than interest rates to deal with financial stability concerns.

On the possibility that EU banks might be at risk from recent sharp interest rate rises, "the likelihood that someone made a mistake somewhere is actually quite high," Wunsch said. But he expressed confidence that existing EU banking regulations should both minimise and contain such risks.