ECB might raise its base interest rate slightly by end of year

ECB might raise its base interest rate slightly by end of year

Greek central banker Yannis Stournaras said on Wednesday there was a possibility that the European Central Bank (ECB) might raise its base interest rate slightly by the end of the year.

Addressing a conference in Athens, Stournaras said the ECB must be very careful with the “interest rate weapon” in its effort to deal with the rapid rise in inflation and noted that this was a supply-based inflation, which cannot be tamed using monetary policy tools. However, he stressed that there could be a small increase in interest rates by the end of the year.

Commenting on the impact of the war in Ukraine on Greece’s real economy, Stournaras said it could shave 1%-2% off the country’s GDP but the final impact will depend on the duration of hostilities.

He sounded reassuring over the impact on non-performing loans, saying there were no signs of an increase so far. He also noted, however, that the current picture could not be considered truly representative of the real situation, given that several loans are still in a state-assistance regime.

Stournaras said Greece was not in danger of a new debt crisis, since the average rate of refinancing for state debt was current 1.4%, less than that of Italy and Portugal. The central banker underlined that the country must regain investment grade as soon as possible, however, saying it was a “national goal”.

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