ECB may raise interest rates in 2024 amid lingering inflation risks
The European Central Bank (ECB) may raise interest rates once or twice this year, according to Pimco’s monetary policy expert Konstantin Veit. He pointed to ongoing inflation risks and geopolitical tensions as key factors behind the potential moves. His comments suggest a cautious approach rather than a return to the sharp hikes seen in 2022.
Veit highlighted persistent inflation pressures, including the war in the Middle East and core inflation that has yet to fully stabilise. These risks could prompt the ECB to act, though he stressed any increases would be limited—likely totalling 50 basis points.
The current economic landscape differs from 2022, with a softer labour market, tighter fiscal policies, and an end to negative interest rates and large-scale bond purchases. This shift means the ECB is unlikely to pursue an aggressive tightening cycle like the one two years ago. Veit also clarified that the ECB’s priority remains its inflation mandate, not economic growth. He framed potential rate steps as a signal to manage risks rather than a broad policy overhaul.
If implemented, the rate rises would mark a measured response to lingering inflation concerns. The ECB’s approach reflects a more restrained economic environment compared to 2022. Veit’s assessment suggests a focus on stability over drastic action.
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