European Central Bank Governing Council member Yannis Stournaras said he would prefer a gradual approach rather than raising interest rates to a level requiring a step back.
European Central Bank (ECB) Governing Council member Yannis Stournaras said ahead of next week’s monetary policy meeting that the European Central Bank should adopt a gradual approach to normalizing interest rates to avoid the risk of backtracking.
Stressing in an interview with Econostream on Wednesday that it would be wrong to raise interest rates to a high level because of the risk of having to cut them later, Stournaras, Governor of the Bank of Greece, said he prefers to remain gradual and flexible in rates. Stournaras added that the incremental approach is the only viable option.
Reiterating that Europe is experiencing supply-side inflation, Stournaras said that the wage increase is the most important indicator to determine the appropriate size of the interest rate hike.
Economists at Goldman Sachs Group Inc., Bank of America, and JPMorgan Chase & Co. forecast a 75 basis point increase at the monetary policy meeting on September 7-8. However, investors have fully priced in such a move by October.
At least six ECB officials have publicly backed a rate hike of more than half a point ahead of next week’s meeting.