European Central Bank Governing Council member Madis Muller called for “sufficiently robust and decisive” action to tackle record euro-zone inflation, saying interest rates remain far from levels that would restrict economic expansion, according to Bloomberg.
Even after a half-point increase in July and a 75 basis-point hike this month, borrowing costs are “in the historical comparison relatively low,” the Estonian central bank chief said Tuesday in Tallinn.
“If we try to evaluate the level at which interest rates really start to put the brakes on economic growth then we are actually a significant step away from this still,” Muller told reporters. “Slowing inflation takes quite a long time.”
Muller is part of a hawkish contingent on the ECB’s 25-member rate-setting panel that’s driving outsized hikes to tackle surging prices. September’s unprecedented monetary tightening was akin to what the Federal Reserve has deployed in the US and may well be repeated at October’s meeting, pushing the deposit rate beyond its current level of 0.75%.
There’s been similarly tough talk already this week from Muller’s colleagues. ECB Vice President Luis de Guindos said a slowdown in Europe’s economy isn’t sufficient on its own to curb consumer prices.
Spain’s Pablo Hernandez de Cos said the ECB will continue raising rates, though stressed that the pace will hinge on its capacity to keep a lid on inflation expectations and reduce the spread of price increases beyond energy.
Muller told Bloomberg later Tuesday that he’s not ruling anything out with regard to the ECB’s next steps. But he said whatever decisions are taken will depend on incoming economic data and projections.
He favors acting sooner to drive down prices.
“Otherwise we have the risk that if we can’t get inflation down fast enough, then later we’ll need to make even steeper interest-rate hike decisions,” Muller said. “This would clearly have a negative impact.”