© Reuters. FILE PHOTO: A view of the European Central Bank (ECB) headquarters in Frankfurt, Germany March 16, 2023. REUTERS/Heiko Becker/File Photo
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(Reuters) – Inflation in the eurozone is proving harder to control than expected and the European Central Bank will likely need to raise interest rates further, possibly above 4%, its central bank chief said. Austrian Governor Robert Holzmann said on Saturday.
Holzmann, a member of the ECB’s Policymaking Executive Council, told ORF 1 radio: “Inflation is proving to be much tougher than one might think.” “I really do expect some more rate hikes,” he said, adding that the extent of further increases will depend on the data.
Asked how high rates could go, after the ECB raised its benchmark refinancing rate to 3.50% on Thursday, he said: “Some of us are expecting it to stay below the level. 4%. I’m afraid it could go even higher.” 4(%)”
The ECB raised rates as promised by 50 basis points on Thursday, continuing its fight against inflation and facing calls from some investors to hold back on policy tightening until the situation turmoil in the banking sector eased.
When asked if he sees the risk of another global financial crisis, like the one in 2008, Holzmann replied: “No, because both – the Silicon Valley Banking problem and Now Credit Suisse – they’re all pretty special issues.”
He added that Credit Suisse is dealing with a “protracted restructuring problem”.
Turning to Raiffeisen International Bank’s Russia business, Holzmann said: “I see a lot of challenges, but solutions can be found.” He did not specify what the solution might look like.
Raiffeisen is deeply embedded in the Russian financial system and is one of only two foreign banks on the Russian central bank’s list of 13 “systemically important credit institutions”, underscoring its importance. for the Russian economy, which is already grappling with sweeping Western sanctions.
Shares of Raiffeisen fell sharply last month after the company received a request for information from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to “clarify its payments business.” and related processes maintained by the RBI in light of recent developments concerning Russia and Ukraine”. .
Austria’s finance ministry earlier this month downplayed concerns that US sanctions officials were scrutinizing Raiffeisen.
