Inflation in the euro zone is proving tougher to crack than expected and the European Central Bank will likely need to raise interest rates further, possibly above 4%, Austrian central bank chief Robert Holzmann said on Saturday.
“Inflation is proving much tougher than thought,” Holzmann, a member of the ECB’s policymaking Governing Council, told ORF 1 radio. “I do expect some more interest rate hikes,” he said, adding that the extent of further increases would be data -dependent.
Asked how high interest rates could go, after the ECB raised its benchmark refinancing rate to 3.50% on Thursday, he said: “Some of us are hoping it will stay below 4(%). I’m afraid it’s probably going to go above 4(%).”
The ECB raised interest rates as promised by 50 basis points on Thursday, sticking with its fight against inflation and facing down calls by some investors to hold back on policy tightening until turmoil in the banking sector eases.
Asked if he saw the risk of another global financial crisis, like that of 2008, Holzmann replied: “No, because both — the Silicon Valley Bank problems and now Credit Suisse — are rather special problems.”
Credit Suisse was dealing with “a longstanding restructuring problem,” he added.
Turning to the issue of Raiffeisen Bank International’s Russia business, Holzmann said: “I see a lot of challenges but it is quite possible that a solution can be found.” He did not specify what a solution could look like.
Raiffeisen is deeply embedded in the Russian financial system and is one of only two foreign banks on the Russian central bank’s list of 13 “systemically important credit institutions,” underscoring its importance to Russia’s economy, which is grappling with sweeping Western sanctions.
Raiffeisen shares fell sharply last month after the company received a request for information from the US Treasury Department’s Office of Foreign Assets Control (OFAC) to “clarify payments business and related processes maintained by RBI in light of the recent developments related to Russia and Ukraine. “
Austria’s finance ministry earlier this month played down concerns about the US sanctions officials scrutinizing Raiffeisen. (Reporting by Paul Carrel; Editing by Gareth Jones and Hugh Lawson)
Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.
Join the Conversation