A quarter-point increase in the European Central Bank’s benchmark rate in July, signaled by the bank last week, won’t halt the euro-area’s economic recovery, ECB Governing Council member Luc Coene said.
“We don’t believe that an interest-rate increase of 25 basis points would stop the recovery at this time,” Coene told reporters in Brussels today.
ECB President Jean-Claude Trichet indicated the rate increase on June 9 after the bank kept its main rate unchanged at 1.25 percent. He said the central bank hadn’t raised its 2012 inflation forecast from 1.7 percent, fueling speculation it won’t increase rates as quickly as previously expected.
“With negative real interest rates, monetary policy is still very accommodative and the pace of economic growth in European countries is exceeding potential growth rates, a clear signal that the accommodative nature of monetary policy must be reduced and that’s what the ECB is currently doing,” said Coene, who also heads the Banque Nationale de Belgique SA.
Economists forecast a quarter-point rate increase by the ECB at its July 7 meeting, the median of 34 estimates in a Bloomberg News survey shows.
John Martens in Brussels at +32-2-285-4303 or email@example.com