By Francesco Canepa<\/p>\n
FRANKFURT, June 19 (Reuters) – The European Central Bank may raise interest rates one more time as soon as next month if it sees more evidence of euro zone inflation spreading beyond energy, ECB policymaker Pierre Wunsch told Reuters, even \u200cas the U.S.-Iran deal dents oil prices.<\/p>\n
The ECB last week raised borrowing costs for the first time in three years. Since, then \u200can interim peace deal between Washington and Tehran triggered a sharp fall in oil prices, easing concerns about a prolonged energy-driven inflation shock.<\/p>\n
Wunsch, who heads Belgium\u2019s central bank and is \u200boften seen as a policy hawk who favours higher rates, said a confirmed deal should reduce inflation and support euro zone growth \u2014 potentially even leading to an oil glut next year.<\/p>\n
But he argued the euro zone’s central bank may still need to raise rates again if inflation rises in sectors such as services – and even if that move may end up being reversed.<\/p>\n
\u201cWe had a not-so-nice reading of services inflation,\u201d Wunsch said in an interview with Reuters, conducted on \u200cThursday. He was referring to a rise in \u2060the euro zone’s services inflation rate to 3.5% in May from 3.0%.<\/p>\n
“If we see more of that, maybe you want to hike another 25 basis points to be on the safe side, and then you can cut rates when \u2060you start seeing the dynamics in the other direction.”<\/p>\n
The ECB\u2019s deposit rate currently stands at 2.25% and financial markets expect a fresh 0.25 percentage-point increase in September or October, possibly followed by one more in the early months of next year.<\/p>\n
JULY OR SEPTEMBER DECISION HINGES ON DATA<\/p>\n
Sources told Reuters after last week\u2019s move that \u200bpolicymakers \u200bsaw a hike in September as more likely than one in July, unless oil \u200bprices rebounded.<\/p>\n
Wunsch said he would support waiting until September only \u200cif incoming data proved inconclusive, stressing the need to monitor inflation in sectors not directly tied to energy, as well as wages.<\/p>\n
“If the data is not going in the right direction, I would plead for a second hike and not for waiting,” he said.<\/p>\n
“But if what we see is ambiguous, I don\u2019t see a need to rush.”<\/p>\n
The ECB’s Chief Economist Philip Lane told Reuters earlier this week the bank would continue to be “proactive” in its fight against high inflation even after the Iran deal.<\/p>\n
OIL GLUT RISK AND ‘LOOKING THROUGH’ INFLATION<\/p>\n
Last week’s rate rise was unanimous by the ECB’s Governing Council.<\/p>\n
Wunsch acknowledged \u200cthat, with an Iran deal now in place and wage growth already moderating, an \u200bargument could be made that the ECB may have skipped last week\u2019s increase and “looked \u200bthrough” the energy-driven inflation spike.<\/p>\n
He said he had even warned colleagues \u200blast week about the risk of an oil glut within a year, potentially pushing crude prices below pre-war levels.<\/p>\n
Still, he \u200cstood by the ECB\u2019s decision, noting it was taken at \u200ba time of rising inflation and \u200bheightened uncertainty.<\/p>\n
“Have we made a mistake? No,” he said. “We have hiked 25 basis points when inflation is going up, so real rates have actually declined slightly, and we can cut at some point if need be,\u201d he added.<\/p>\n
CALL FOR CLEARER CONDITIONAL GUIDANCE<\/p>\n
He believes, however, that \u200bthe ECB could go beyond its mantra that it \u200cmakes decisions \u201cmeeting by meeting\u201d depending on the data, saying \u201cat some point it would not mean anything\u201d.<\/p>\n
Instead he advocated giving conditional guidance.<\/p>\n
\u201cI \u200bwould have been comfortable saying, for instance: ‘we will probably have to do more if the conflict doesn’t end soon’,” he said. “Now \u200bit seems to be ending.”<\/p>\n
(Reporting by Francesco Canepa; Editing by Susan Fenton)<\/p>\n","protected":false},"excerpt":{"rendered":"By Francesco Canepa FRANKFURT, June 19 (Reuters) – The European Central Bank may raise interest rates one more…\n","protected":false},"author":2,"featured_media":73841,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2480],"tags":[2487,2486,1858,2485,3128,40518,484,40516,40517],"class_list":["post-73840","post","type-post","status-publish","format-standard","has-post-thumbnail","category-euro-zone","tag-euro-area","tag-euro-zone","tag-european-central-bank","tag-eurozone","tag-inflation-rate","tag-oil-glut","tag-oil-prices","tag-pierre-wunsch","tag-wunsch"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts\/73840","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/comments?post=73840"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts\/73840\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/media\/73841"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/media?parent=73840"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/categories?post=73840"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/tags?post=73840"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}