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ECB Must Hike Interest Rates to Restrict Growth

The European Central Bank (ECB) still needs to raise interest rates significantly over the coming meetings to restrict growth and dampen inflation, which has been far too high, said Finnish Central Bank Chief Olli Rehn.

European central bank
European central bank

ECB criticized for Being Slow in Raising Interest Rates

The ECB has raised rates by a combined 2.5 percentage points since July and promised "a steady pace" of hikes over the coming months. Still, some policymakers have started to argue that a peak in interest rates may be near, given a looming recession. While most policymakers reject this argument saying it took time to dismantle a decade of stimulus, Rehn noted some of the criticism might be fair.

Uncertainty Justified Prudence in ECB's Decision

With the benefit of hindsight, there may be some truth in the argument, at least from the standpoint that we could thus have created more policy space to react if the eurozone economy falls into recession," Rehn said. But Russia's invasion of Ukraine created pervasive uncertainty, which justified prudence, Rehn added.