ECB Rate Increases Should Continue, Villeroy Explains The Reasons!


 Calls for the European Central Bank (ECB) to extend interest rate hikes continue to be heard, with the latest coming from policymaker Francois Villeroy de Galhau.

Villeroy, who is also head of the French central bank, said that the ECB should continue to raise rates until core inflation clearly reaches its peak.

As of October, the central bank had raised rates by 200 basis points to 1.5% in just three months, with markets expecting it to peak around 3% next year.

The high cost of energy also gave a boost to the European Zone, which saw inflation soar this year.

Villeroy expects headline inflation, currently at a record high of 10.7% last month, to peak in 2023, but warned that it may take two to three years to return inflation to the ECB's target.

Even so, the rapid pace of hikes has put the ECB close to a 'neutral rate' of between 1.5% and 2%.

Villeroy said the central bank is now not far from neutral rates, where tightening measures may be more flexible or slower.

Market players expect a rate hike of 50 basis points in December following a 75 basis point increase for the second time in a row.