Financial Associated Press, Shanghai, September 18 (Editor Huang Junzhi) The European Central Bank (ECB) chief economist Philip Lane said on Saturday that the ECB is expected to raise interest rates until 2023, and the process will also include several rate hikes. That will cause pain for consumers as it tries to dampen demand, which is now driving inflation up.
“We do think it’s going to be a dampener on demand, and we’re not going to pretend it’s pain-free. Demand is now a source of inflationary pressure, it’s not like it was six to nine months ago,” he told a conference.
Lane noted that as it continues to stimulate the economy, the ECB’s deposit rate of 0.75% remains low, so the central bank’s job remains unfinished. Bundesbank President Nagel also said earlier on Saturday that borrowing costs would need to rise sharply to keep inflation under control.
The European Central Bank raised interest rates by a historic 75 basis points this month, the second rate hike this year after raising rates by 50 basis points in July. But that’s still a very low level by historical standards.
Lane also pointed to the International Monetary Fund’s forecast, saying a mild recession in the euro zone could not be ruled out. Given high energy prices and natural gas shortages, the euro zone economy could stagnate over the winter, or even experience a recession, he said.
“If our base case is for little growth, a technical recession, a mild recession, cannot be ruled out,” he said.
But while he said the ECB is likely to keep raising rates at every meeting for the rest of the year and early next year, the bank is open to when to stop raising rates and will make a decision at meeting after meeting.