MADRID, June 22 (Reuters) – The European Central Bank will need to raise interest rates by another 25 basis points in July to combat inflation but the path afterwards remains unclear, ECB policymaker Pablo Hernandez de Cos said on Friday.
Last week, the ECB raised its key interest rates by a quarter of a percentage point but more notably raised its inflation outlook to show prices still rising through 2025 at what ECB President Christine Lagarde said was an “unacceptable level”.
“If the central scenario of our forecasts published by the ECB last week materialises, we will also have to raise 25 basis points again in July, but beyond that it is not appropriate to make any forecasts,” De Cos told a financial event in northern Spanish city of Santander.
The central bank for the 20 countries that share the euro expects inflation to stay above its 2% target all the way through to the end of 2025.
De Cos added that given the “high uncertainty … we will continue to take our decisions depending on the data and, in particular, on the aggregate assessment of the inflation outlook, the dynamics of underlying inflation.”
Euro zone inflation has been moderating for months, courtesy of lower energy prices and the steepest increase in rates in the ECB’s 25-year history.
But it remains unacceptably high for the ECB at 6.1% in May, with underlying price growth only just starting to slow despite signs economic growth is stagnating.
Reporting by Jesús Aguado; additional reporting by Emma Pinedo; editing by David Latona and Conor Humphries
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