ECB member says market is mispricing rate hikes

The European Central Bank (ECB) will not stop with a single 50 basis point hike at its next rate-setting meetings, a board member said. The ECB raised rates four times throughout 2022, bringing its deposit rate to 2%.

The central bank in December said it would be increasing rates further in 2023 to address sky-high inflation.

Recent data has shown a slowdown in headline inflation, even if it remains well above the ECB’s 2% target. December inflation came in at 9.2% in the euro zone, according to preliminary numbers. This was the second consecutive monthly drop in price rises across the euro zone. However, the board member, Knot, doesn’t think all of the recent data is “encouraging”.

Market players are expecting the ECB to raise rates at its next meeting in February. The wider question is whether the central bank gets too aggressive with its policy tightening and restricts economic growth. However, Knot has made it clear that there will be at least two more rate hikes.