(Bloomberg) -- It’s unclear how far the European Central Bank will need to go in hiking interest rates, Governing Council member Pablo Hernández de Cos said.
“Given the enormous uncertainty that exists, it is not possible, however, to anticipate to what extent we should raise interest rates to ensure our medium-term inflation target,” de Cos, who heads the Bank of Spain, told lawmakers in Madrid on Tuesday.
De Cos, who is considered among the Governing Council’s more dovish policymakers, spoke after Spanish data showed inflation eased for a fourth month in November. He has previously cited research by his institution suggesting that a terminal rate of 2.25% to 2.5% would bring inflation down to the ECB’s 2% target by the end of 2024.
The rapid decline of the price index in Spain could be an early indicator of how inflation will later evolve in the rest of the euro zone, de Cos said.
The ECB has already increased borrowing costs by 200 basis points this year and is predicted to hike by at least 50 basis points next month. That would bring the deposit rate to at least 2%.
The Spanish economy will likely avoid a contraction in the fourth quarter with indicators suggesting an expansion similar to that in the previous quarter, de Cos said.
He also expects underlying inflation, which excludes volatile items like energy and food, to start easing in the spring.
(Adds de Cos comments on euro zone inflation and Spanish growth)
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