ECB governors see at least two more rate hikes, sources say

FRANKFURT (Reuters) – European Central Bank policymakers left Thursday’s meeting expecting at least two more rate hikes, although differences remained about their pace and final destination, two members of the ECB’s rate-setting Governing Council told Reuters.

The ECB raised its main interest rate by 0.5%, to 2.5%, on Thursday and explicitly signalled at least one more hike of the same magnitude next month, reaffirming that it would stay the course in the fight against high inflation.

Two policymakers who talked to Reuters after the meeting said it was clear that rates would then be increased again at the ECB’s following meeting in May, although the Governing Council had not discussed the size of that raise on Thursday.

Based on current data, they said, some policymakers were anticipating a possibly final 25-basis-point increase at the ECB’s May 4 meeting, while others felt the streak of 50-basis-point hikes should continue, taking the deposit rate to 3.5%.

That was seen a possible terminal rate by some policymakers while others envisaged rate increases continuing through the summer to even higher levels.

The sources said Thursday’s decision was easily reached, with only a small minority of policymakers feeling it was too early to commit to a March rate hike worth 50 basis points.

An ECB spokesperson declined to comment.

At a news conference after Thursday’s decision, ECB President Christine Lagarde said the central bank had “ground to cover” in raising rates and that disinflation hadn’t started yet in the euro zone.

(Reporting by Francesco Canepa and Balazs Koranyi; Editing by Catherine Evans)