ECB's Lautenschlaeger Sticks With Chorus on Rate-Hike Optimism

(Bloomberg) -- Sabine Lautenschlaeger is the latest senior European Central Bank official to suggest there’s still a case for increasing interest rates this year.

The Executive Board member said in an interview with Politico that the economy is still in the environment projected by the ECB and that she’ll wait for updated forecasts in March before deciding whether to change her mind.

ECB's Lautenschlaeger Sticks With Chorus on Rate-Hike Optimism

“I’m data-driven in this,” she said. “I do not feel disheartened yet and then you have to think where you will start with a rise in interest rates. We have different key rates, not only one.”

Lautenschlaeger’s comments chime with those of colleagues including Executive Board member Yves Mersch and Governing Council member Ardo Hansson who have warned against overreacting to the euro zone’s slowdown. That’s despite a spate of disappointing data from across the 19-nation bloc in recent weeks that have prompted investors to doubt the central bank will be able to hike rates in 2019.

Mersch told Slovak newspaper Hospodarske Noviny this month that “what’s currently happening with the economy is still broadly in line with our base scenario.” Hansson said the euro area is on “the same trajectory that we forecast some quarters back.”

President Mario Draghi said this week that the economy is slowing but not headed into a recession.

Officials hold their next policy meeting on Jan. 24, the first since ending asset purchases in December. The Governing Council currently pledges to keep rates at record lows “at least through the summer.”

Lautenschlaeger also said the ECB has to do more work in the coming five years to get banks to clean up their balance sheets, increase their financial strength and improve risk management. She’d like to have more data on connections between banks and the so-called shadow banks that have taken on business that traditional lenders no longer want to conduct.

©2019 Bloomberg L.P.