The chances of a further European interest rate hike will increase as the European economy strengthens, European Central Bank Governing Council member Nout Wellink said yesterday.
Interviewed yesterday on Dutch television, he also voiced concern about the rising US balance of payments deficit and said lowering the deficit should be given greater priority.
The European Central Bank raised rates by 25 basis points to 2.25 per cent on December 1st in its first increase in five years, defying protests from politicians, trade unions, businesses and banks, saying inflation risks had grown amid stronger signs of an economic recovery.
"Several amongst us are saying: we have made a step towards a higher interest rate, it was by one quarter, but this is not yet a rate that fits with a situation of equilibrium by a long stretch," Mr Wellink said on a current affairs programme.
"It is clear that... as the European economy strengthens, the chances for a further rate rise increase."
Asked whether the rate decision was a concession to finance ministers who did not want any rise in interest rates, Mr Wellink said: "We did not take into account the finance ministers in any way, but a rate rise must fit in with the inflation expectations of the moment and the growth expectations of the moment." - (Reuters)
