ECB needs more rate hikes but inflation close to peak, chief economist says

ECB chief economist Philip Lane said in an interview with Milano Finanza interest rates need to be increased several more times in order to reduce price pressures. Such measures are necessary even if overall inflation is close to zero. 

According to Lane, the peak of inflation is already close. Previously, the bank raised rates by a total of 200 basis points to slow record high inflation. Now, after a hike of 75 bps. The ECB has reported a reduced pace of monetary policy tightening for December.

This signals a 50 bps increase in the ECB deposit rate after the upcoming meeting. In 2023, the deposit rate could be as high as about 3%.

Lane clearly did not approve of an increase by that level, but still voiced his argument for a slowdown. 

Inflation at 10.0% may have already peaked, but its decline will be slow in the coming months. Growth will still be possible in early 2023.