(March 10): European Central Bank (ECB) Governing Council member Madis Muller said the chances of an interest-rate hike have risen of late, but that officials shouldn’t react hastily to the war in Iran and its implications.
“The probability of the next change in the policy rates now being more towards an increase rather than the opposite,” the Estonian official told an event on Tuesday in Vilnius. “That probably has gone up in the last couple of weeks.”
At the same time, the ECB shouldn’t “rush into any decisions”, he said. “We should first see if this increase in energy prices that we now are experiencing, if that turns out to be transitory or not.”
Traders ramped up bets on monetary tightening as the fighting in the Middle East sent energy prices surging. But having at one stage priced two quarter-point hikes in the deposit rate this year, wagers have been pared back to less than one after President Donald Trump signalled the conflict may soon end.
Speaking at the same event, Muller’s Lithuanian counterpart Gediminas Simkus also warned against hasty action.
“Stay calm, don’t overreact because things are developing,” he said. “If things would last, if things spread, it would have implications not only on inflation but also more generally on the Middle East and also for Europe.”
See also: Pakistan keeps rates at 10.5% as oil surge clouds outlook
The ECB will next set borrowing costs on March 19.
Uploaded by Felyx Teoh
