Today, the head of Austria's central bank, Robert Holzmann, has voiced his views on a justified interest rate hike. According to him, the European Central Bank should raise interest rates by 50 basis points at each of the next four meetings because inflation is still high.
The ECB has raised rates by 3 percentage points since July and is targeting a 50-point increase for March. The ECB also leaves room to raise rates at a later stage depending on the latest data at that point.
Holzmann, an outspoken conservative on policy, said that based on current trends, he would lean towards 50 basis point moves in March, May, June and July.
"My hope is that in the next 12 months, we will reach the peak of interest rates."
The four measures advocated by Holzmann would take the deposit rate to 4.5%, well above the 4% peak rate set by the market, a level that no other policymaker has advocated.
"If we want to get inflation back to two percent in the future, we have to be aggressive," Holzmann said, arguing that only a 4% deposit rate would start to curb inflationary growth.
Holzmann also called on the ECB to accelerate the reduction of banks' balance sheets, possibly by ending full reinvestment in the Pandemic Emergency Purchase Program (PEPP) earlier than planned.
All maturing debt in the Pepp scheme is now set to be fully reinvested into the market through 2024.
