ECB Hawks Signal Further Tightening Amid Persistent Inflation
On March 21, 2023, two influential members of the European Central Bank’s Governing Council warned that additional interest‑rate increases are likely needed to tame inflation that remains stubbornly high across the eurozone. Pierre Wunsch of Belgium and Robert Holzmann of Austria echoed concerns raised a day earlier by their hawkish colleagues from Slovakia and Lithuania, arguing that further tightening is essential to keep price pressures in check.
Recent Policy Move and Current Rate Level
The officials’ remarks follow the ECB’s decision last Thursday to lift its benchmark refinancing rate by 50 basis points, taking it to 3.5 %. Since July of the previous year, the cumulative increase has amounted to 350 basis points. Despite this aggressive tightening, inflation in the eurozone continues to run at 8.5 %, well above the bank’s 2 % target for price stability.
Assessments of Inflation Persistence
Robert Holzmann, speaking to ORF 1 radio in Austria, said he anticipates “a few more interest rate increases” and stressed that the scale of any future hikes will depend on incoming data. He added that while some policymakers hope the benchmark rate will stay below 4 %, he fears it will probably exceed that level. Pierre Wunsch, in an interview with the Belgian newspaper L’Echo, stated, “We know that we need to do more of this. At what level? That is unclear. Meeting by meeting will take place.” He also noted that the ECB still has “a far way to go” if its baseline inflation projection proves accurate.
ECB Outlook and External Uncertainties
The ECB’s own forecast, released after the last rate move, expects inflation to remain above the 2 % objective through 2025. This outlook was formed before a notable sell‑off in bank shares earlier in the week. The bank acknowledged that the failure of two U.S. lenders and emerging difficulties at Credit Suisse Group have heightened uncertainty about the economic environment. Nevertheless, the hawks on the Governing Council maintain that further tightening is warranted.
Balancing Risks and Policy Commitment
Both officials emphasized that the ECB’s primary mandate is to preserve price stability, defined as inflation below 2 %. With the current rate at 8.5 %, the institution has a considerable distance to travel to meet that goal. They argued that the recent decision to raise rates despite the turmoil in the banking sector demonstrates the bank’s commitment to fighting inflation, even at the risk of higher borrowing costs for households and firms.
Future Path Depends on Data
Holzmann reiterated that the magnitude of any additional increases will be guided by the facts, echoing his earlier comment that the extent of future hikes depends on the data. Wunsch reinforced the view that further action is necessary, repeating, “We know that we need to do more of this.” The policymakers warned that while tighter credit could dampen spending and investment, such costs are deemed necessary to restore inflation to target.
Conclusion
The ECB’s stance, articulated by its hawkish members, signals that additional rate hikes are likely in the coming months. The bank will continue to weigh the inflation fight against the need to support economic growth, adjusting its policy as new information emerges. Until inflation subsides toward the 2 % benchmark, the Governing Council’s hawks expect the tightening cycle to persist.
Now count words. Let’s approximate.
I’ll count manually roughly.
First paragraph: “On(1) March2 21,3 2023,4 two5 influential6 members7 of8 the9 European10 Central11 Bank’s12 Governing13 Council14 warned15 that16 additional17 interest‑rate18 increases19 are20 likely21 needed22 to23 tame24 inflation25 that26 remains27 stubbornly28 high29 across30 the31 eurozone.32 Pierre33 Wunsch34 of35 Belgium36 and37 Robert38 Holzmann39 of40 Austria41 echoed42 concerns43 raised44 a45 day46 earlier47 by48 their49 hawkish50 colleagues51 from52 Slovakia53 and54 Lithuania,55 arguing56
