The European Central Bank is likely to raise interest rates by 50 basis points (bps) next week on the way to potentially moving beyond a deposit rate of 3% amid ongoing inflationary concerns, governing council member Gabriel Makhlouf said on Monday.
The ECB has raised its rate on bank deposits from minus 0.5% to 1.5% in a span of three months, but a slowdown in euro zone inflation has bolstered the case for those advocating a 50-bps hike on Dec. 15 after back-to-back increases of 75 bps.
Makhlouf said he was not sure the larger-than-expected fall in euro zone inflation in November meant it had peaked yet and that 50 bps “should be the floor” at next week’s discussion.
“I would anticipate that 50 basis points is probably where we will end up. But let’s see the evidence. Let’s have a discussion,” Makhlouf told Reuters in an interview.
“I think starting to talk about where we’re going to end up is probably premature and I can see scenarios where we go beyond 3%,” he said when asked how comfortable he was with market pricing a terminal rate just below 3%.