Postjan Vaseli, a member of the Governing Council of the European Central Bank, said the bank is expected to raise rates by 75 basis points in the next two meetings to fight high inflation, after which it will discuss reducing its balance sheet next year.
The ECB waited a long time before accelerating its pace by raising rates by 125 basis points in its last two meetings, the fastest pace of monetary tightening ever recorded in Europe.
Vasli, who is the head of the Slovenian central bank, said the deposit rate of 0.75% is still low enough to stimulate growth, calling for interest rates to be raised to levels that could hold back the economy.
Central Europe faces a major challenge to reduce inflation, which has reached 5 times its 2 per cent target, and is expected to remain above this target until 2024, which increases the risk of it grabbing at such high levels.
Monetary policy makers at the European Central Bank want to achieve their first goal of reaching the “neutral” interest level, a level that does not stimulate growth but does not dampen it.
This target rate fluctuates between 1.5 and 2 percent, but Vasley believes these rates will not be enough to tame inflation, even if the eurozone will experience a recession this winter.
“I think we need to go beyond the neutral level to calm inflationary pressures,” Vaseli said.
The European Central Bank, after reaching the neutral level at the beginning of the year, is also expected to start discussing how to reduce its budget, which is close to 9 trillion euros (8.76 trillion dollars), after buying almost 5 trillion. euros of private bonds, during the Corona pandemic. .
