ECB's de Cos: Still have some way to go with rate hikes

Eren Sengezer FXStreet

European Central Bank’s (ECB) policymaker Pablo Hernandez de Cos said on Wednesday that the inflation spike is proving highly persistent and has also broadened, as reported by Reuters.

Key takeaways

"We still have some way to go with rate hikes, specific level that interest rates may have to reach to be consistent with this objective is uncertain."

"Interest rate increases precede the reduction in our balance sheet."

"After first allowing markets to absorb significant TLTRO III repayments, normalisation of the ECB’s balance sheet could be followed by ending full reinvestment of app portfolio."

"Yields already reflect, at least to certain extent, current expectations on the implementation of balance sheet reductions."

"Need for the balance sheet reduction in the euro area to be very gradual and predictable."

"Future decisions should account for higher probability of a recession that we are currently observing."

Market reaction

EURUSD edged slightly lower from session highs following these comments and was last seen gaining 0.62% on the day at 1.0412.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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