The European Central Bank may have to accept a moderate recession to stem price pressures if it sees signals that inflation expectations are rising, Governing Council member Robert Holzmann said.
“We hope that won’t become necessary,” Holzmann told the Austrian public broadcaster ORF late Sunday.
Euro-area rate-setters have been assessing the impact of rate increases on economic output after a larger-than-expected half-point initial tightening move this month. ECB President Christine Lagarde has vowed to raise interest rates for as long as it takes to return inflation to the 2% target.
Holzmann, who is also the governor of the Austrian National Bank, said the size of the next tightening step in September will depend on developments in the economic outlook. That will determine whether the next move is another 50 basis-point hike, a larger or a smaller one, he said.
