Lithuania’s Gediminas Simkus and Latvia’s Martins Kazaks, two of this year’s most outspoken ECB hawks, have left the door open for a smaller rate move, hinting at a tradeoff between balance-sheet reduction and the pace of hikes.
If the range of instruments is broadened, “then perhaps the rate increase can step down at some point,” Kazaks said in November.
France’s Francois Villeroy de Galhau has said openly that he prefers a half-point increase. Chief Economist Philip Lane has signaled a similar view, saying “a lot has been done already” and the “starting point is different now.”
After December, economists surveyed by Bloomberg predict another 50 basis-point hike in February — taking the deposit rate to a 2.5% peak. They see the ECB starting to offload bonds under QT in the first quarter.