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MNI SOURCES: More ECB Policymakers See Restrictive Rates

(MNI) London

It is becoming increasingly likely that the ECB will hike to restrictive levels, but policymakers stress extreme uncertainty.

True

More European Central Bank policymakers are becoming convinced that the benchmark interest rate will need to move to a restrictive setting to contain inflation, although there is no clear agreement amongst Governing Council members as to the neutral level of interest rates and many stress extreme uncertainty, senior Eurosystem sources have told MNI.

Market expectations, which are for the benchmark ECB deposit rate to rise from 0.75% to a peak just below 3% in June 2023, are “not far-fetched”, according to one official, though he noted that it was still too early to say whether rates would rise by another 75 or 50 basis points in October. National central bank models suggest similar scenarios, and point to a terminal rate that is likely to be in restrictive territory, higher than the neutral rate of interest.

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More European Central Bank policymakers are becoming convinced that the benchmark interest rate will need to move to a restrictive setting to contain inflation, although there is no clear agreement amongst Governing Council members as to the neutral level of interest rates and many stress extreme uncertainty, senior Eurosystem sources have told MNI.

Market expectations, which are for the benchmark ECB deposit rate to rise from 0.75% to a peak just below 3% in June 2023, are “not far-fetched”, according to one official, though he noted that it was still too early to say whether rates would rise by another 75 or 50 basis points in October. National central bank models suggest similar scenarios, and point to a terminal rate that is likely to be in restrictive territory, higher than the neutral rate of interest.

Keep reading...Show less