© Reuters. FILE PHOTO: Francois Villeroy de Galhau, Governor of Banque de France, attends the Paris Europlace International Financial Forum in Paris, France, July 12, 2022. REUTERS/Benoit Tessier/File Photo
By Francesco Canepa and Leigh Thomas
FRANKFURT/PARIS (Reuters) -Three influential European Central Bank policymakers on Wednesday warned investors who are overwhelmingly betting against an ECB interest rate hike next week that the decision was still up in the air.
With euro zone economic activity deteriorating and inflation easing, although still high, the ECB is widely expected to bring a streak of nine consecutive rate increases to an end at its meeting on Sept. 14.
But the Dutch, French and German central bank chiefs, speaking on the last day before the ECB’s self-imposed quiet period, said the Governing Council’s decision was still open.
Dutch central bank governor Klaas Knot was quoted as saying investors may be underestimating the chances of a rate hike next Thursday, and that the decision would be “a close call”.
“I continue to think that hitting our inflation target of 2% at the end of 2025 is the bare minimum we have to deliver,” Knot told Bloomberg.
“I would clearly be uncomfortable with any development that would shift that deadline even further out. And I wouldn’t mind so much if it shifted forward a little bit.”
His French peer Francois Villeroy de Galhau hinted that a fresh rate hike could still come at a later date.
“Our options are open at this Council as at the following meetings,” he told reporters.
“We are close, very close to the peak in our interest rates. We are however still far from the point where we could consider cutting them.”
The Bundesbank’s Joachim Nagel spoke along the same lines, saying next week’s decision would depend, among other factors, on the ECB’s new economic projections and that rate cuts were not imminent in any case.
“It would be wrong to bet on a rapid decrease in interest rates after the peak,” Nagel told German business daily Handelsblatt.
Speaking to the Reuters Global Markets Forum last week, Austria’s central bank chief Robert Holzmann said the ECB may still do another “hike or two” while Portugal’s Mario Centeno said it needed to be very cautious about any further tightening.
