ECB’s lane says current data indicate a rate hike on May 4

Bloomberg

Recent economic figures suggest the European Central Bank should increase interest rates again at its next decision on May 4, Chief Economist Philip Lane told French newspaper Le Monde.

“The current data are indicating that we should raise rates again” next week, Lane said in an interview published Tuesday. “This is still not the right time to stop. Beyond that, I don’t have a crystal ball; it will depend on the economic data.”

The interview — published just over a week before the next meeting — is in line with remarks from other policymakers and signals another hike in the ECB’s deposit rate is all but certain, with the only remaining question over the size of the move.

Whether it’s a quarter- or a half-point step hinges now on inflation and bank-lending numbers due two days before the decision. Officials are offering their final remarks before a quiet period begins on Thursday.

Lane himself didn’t tell Le Monde how big a hike he prefers, stating instead that “the analysis suggests that it would be inappropriate to leave our deposit rate at the current level of 3%.”

Comments Monday suggested Bank of France chief Francois Villeroy de Galhau may favor the smaller of the likely increments, with money-market investors also seeing that outcome as more probable.

The larger option remains on the table, however, according to ECB Executive Board member Isabel Schnabel.

“Inflationary pressures remain in certain sectors of the economy, but are easing in others,” Lane said. “I don’t think we are in a 1970s-style situation, when inflation was in fact sticky.”

To avoid ending up in a position like that, “it’s important that the ECB raises its interest rates to ensure inflation returns to 2% in a timely manner,” he said.