ECB Governing Council member Yannis Stournaras said “in my opinion, the adjustment of interest rates needs to be more gradual, taking into account the slowdown in growth of the euro area economy.”

“Given the high uncertainty, ongoing geopolitical and macroeconomic turmoil, and volatility in the markets, it is very difficult to accurately predict the level at which interest rates need to be set,” he added.

ECB Governing Council member Peter Kazimir said, “An inflation drop in two consecutive months is good news. But it is not a reason to slow the tempo of raising interest rates… I am convinced that we need to deliver two more hikes by 50 basis points.”

“For me, the most important is core inflation trend,” Kazimir said. “We are halfway through. If it were up to me, I would enter summer holidays with the tightening cycle completed. But don’t ask me today, how high we will go with the rates, and how long will they need to stay there to tame inflation as needed.”

ECB Governing Council member Olli Rehn said “there are grounds for significant increases” in the key interest rate in the winter and early spring.

Rehn declined to estimate the terminal rate. “It’s certain that the rate hikes that we’ve already made and the forward guidance on upcoming hikes have the effect that markets are pricing in a lot of it into the Euribor rates,” he said.

ECB Governing Council member Klaas Knot said in a WNL interview, “expect us to raise rates by 0.5% in February and March and expect us to not be done by then and that more steps will follow in May and June.”

“In the December data, we saw a first decline in headline inflation, but that was entirely due to base effects and lower energy inflation,” Knot said. “We focus on core inflation where, unfortunately, there is no good news. Because it is still on the rise. Underlying inflationary pressures show no signs of abating yet.”

In a separate interview with La Stampa, Knot said, “At some point, of course, the risks surrounding the inflation outlook will become more balanced… That would also be a time in which we could make a further step down from 50 to 25 basis points, for instance. But we are still far away from that.”

ECB President Christine Lagarde said, “We have to also stay that course of resilience that we observed in 2022. Stay the course is my mantra for monetary-policy purposes.”

“I hope that in 2023 fiscal policy will not work in a counter-cyclical way to monetary policy,” she said. “We don’t need to be pushed to do more than is necessary.”

Lagarde also noted that China’s reopening “will have inflationary pressure on many of us, simply because the level of energy that was consumed by China last year was certainly less than what they will consume this year, the amount of LNG that [they] will be buying from the rest of the world will be higher than what we have seen and there is not so much spare capacity in terms of oil and gas.”

“So there will be constraints, there will be more inflationary pressure coming out of that added demand,” she added.

In the accounts of ECB’s December meeting, it’s noted that a “large number” of members “initially” expressed preference for a 75bps hike. But some of them expressed their willingness to agree on a 50bps if the majority were to support Chief Economist Philip Lane’s proposal.

That is, to rate interest rates by 50bps and to communicate that interest rates would “still have to rise significantly at a steady pace to reach levels that were sufficiently restrictive”. Meanwhile, 50bps hikes was “judged to constitute an appropriate pace”.

Also, “a less frontloaded but steadier approach to bringing interest rates to restrictive levels could be seen as consistent with the more persistent nature of the inflation process and continued elevated uncertainty…

Nevertheless, some member still held the view that “the proposed adjustment of the monetary policy stance was insufficient – even taking into account the combination of a 50 basis point interest rate hike with the announcement of a reduction in APP reinvestments.”

Full meeting accounts here.

ECB President Christine Lagarde said in Davos today, “Inflation by all accounts, whichever way you look at it, is way too high.”

“There is determination at the ECB to bring (inflation) back in a timely manner and we should stay the course until we have been in restrictive territory for long enough to bring it down,” Lagarde added.

“The job market in Europe has never been as vibrant as it is now. The unemployment number is at rock bottom compared with what we’ve had in the last 20 years. And the participation rate which matters as well, is also very, very high level and that is pretty much homogeneous throughout the euro area,” she said.

“The news has been much more positive over the past few weeks,” she said. “It will not be a brilliant year (in 2023), but a lot better than feared”.