(Bloomberg) -- European Central Bank Governing Council member Robert Holzmann said another half-point increase in borrowing costs is “still on the cards” if the turmoil that’s rocked the global banking system doesn’t worsen.

While acknowledging that the episode, sparked by the collapse of Silicon Valley Bank, could have a comparable effect to interest-rates hikes by curbing credit, Holzmann said his “feeling would be to stay on course.”

Similarly, Sunday’s announcement by OPEC+ of a surprise production cut isn’t likely to have a major impact on the path ahead, the hawkish Austrian central-bank chief said.

“For the time being a little bit of optimism has returned, but there’s still some kind of uncertainty,” he said in an interview in Vienna. “If things in May haven’t really become more terrible, I think we can afford another 50 basis points, and in particular, if no social agreement emerges to temper inflation we’ll have to do more to produce it.”

The euro extended a rally after the comments, up 0.7% to $1.0917. German two-year bonds erased earlier gains, with the yield trading little changed on Monday around 2.68%.

Holzmann’s remarks are among the most concrete on what the ECB’s next steps may be, with most of his colleagues wary of making predictions amid such elevated uncertainty. A growing number, however, say the euro zone’s most aggressive cycle of rate rises may be nearing its conclusion after 350 basis points of monetary tightening since July.

Lithuania’s Gediminas Simkus said earlier Monday that the “larger part” of the ECB’s rate increases are over — echoing Bank of France chief Francois Villeroy de Galhau last week. Greece’s Yannis Stournaras said in a newspaper interview published Sunday that “I feel now that we are close to the end.” 

For investors, too, the finish is in sight: Money markets are betting the deposit rate, currently 3%, will peak at about 3.6%. They, however, see only an increase of about 25 basis points in May.

Holzmann said the greater prudence displayed by officials isn’t “financial dominance,” or acting out of fear that higher borrowing costs risk havoc in the banking system. 

“It’s more to say as the financial markets became more careful with their credit supply, it allows us to do less,” he said, citing estimates that the recent turmoil could slow lending to the equivalent of 0.5 to 1.5 percentage points of rate hikes.

Holzmann said the problem with shifting down to a quarter-point move in May is that “it’s difficult to go back again.”

The ECB has already lifted borrowing costs once amid acute banking stress  — going ahead with its planned half-point rate step in March, even as Credit Suisse Group AG became engulfed in a storm that later saw it taken over by UBS Group AG. 

Officials say incoming data will now steer where they head next. 

March numbers from the 20-nation euro area revealed the biggest slowdown ever in headline inflation, to 6.9%, after the spike in energy prices caused by Russia’s invasion of Ukraine faded.

But that was accompanied by another record for core inflation, which strips out such volatile items and is the current focus of rate-setters in Frankfurt.

The task of bringing price gains back to the 2% goal became even more daunting at the weekend after the shock decision by OPEC+, which risks boosting oil prices. But Holzmann played down its likely impact on inflation. 

“This will lead to a price increase compared to the levels we had before,” he said. “It will add something, but only on the margin.”

--With assistance from James Hirai and Greg Ritchie.

(Updates with market reaction in fifth paragraph.)

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