On April 24, according to the British Financial Times, the European Central Bank Governing Council and Belgian Central Bank President Wensch warned that investors underestimated the increase in the cost of borrowing in the euro zone.
He insisted that he would agree to stop raising rates only if wage growth starts to slow.
“We’re waiting for wage growth and core inflation to come down, along with headline inflation, before we get to a point where we can pause rate hikes,” he said.
His focus on wage growth raises the bar for what must be met for the ECB to halt interest rate hikes. “It wouldn’t surprise me if we had to raise the deposit rate to 4 per cent at some point.”
He suggested that borrowing costs could rise more than investors expected.
Investors are betting the ECB’s deposit rate will rise to just above 3.75%.
Investors expect the ECB to hike rates more than the Federal Reserve and the Bank of England, which are expected to raise rates by 25 basis points next month.