The European Central Bank will probably need to raise interest rates further, possibly above 4%, according to Austrian central bank chief Robert Holzmann on Saturday, because of the fact that the euro zone is proving tougher to crack than expected.
Holzmann, a member of the ECB's policymaking Governing Council, told ORF 1 radio that inflation is proving to be much tougher than thought. He said that there would be more interest rate hikes and that the extent of further increases would be dependent on data.
After the ECB raised its benchmark refinancing rate to 3.50% on Thursday, he said how high interest rates could go, some of us are hoping it will stay below 4 I'm afraid it's going to go above 4 The ECB raised interest rates on Thursday, sticking with its fight against inflation and facing down calls by investors to hold back on policy tightening until the banking sector eases.
Asked if he saw the risk of another global financial crisis, like that of 2008, Holzmann replied: No, because both the Silicon Valley Bank problems and now Credit Suisse are rather special problems. Credit Suisse was dealing with a longstanding restructuring problem, he added.
Holzmann said that it is quite possible that a solution can be found for the issue of Raiffeisen Bank International's Russia business. He didn't say what a solution could 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 to Russia's economy, which is grappling with sweeping Western sanctions.
Raiffeisen shares 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 payments business and related processes maintained by RBI in light of recent developments related to Russia and Ukraine Austria's finance ministry earlier this month, which has played down concerns about U.S. sanctions officials scrutinising Raiffeisen.