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ECB Could Raise Rates Above 3.5%, Hold Them There, Official Says

Governor of the Central Bank of Ireland, Gabriel Makhlouf, said he could see the European Central Bank raising interest rates higher than 3.5%.



BERLIN—The European Central Bank could increase interest rates above 3.5% and likely won’t cut them again this year as the bank moves forcefully to bring inflation back to target, a top ECB official said.

The ECB raised its key rate to 2.5% this month, the highest level since 2008, and said it intends to raise rates to 3% next month. The eurozone economy looks set to avoid recession this year and employment grew robustly at the end of last year, while underlying inflation is at a record high. Investors expect the ECB to lift rates to a peak of 3.5% by July, before starting to cut them again later this year or early next year.

“I could see it [interest rates] being higher than 3.5%,” said

Gabriel Makhlouf,

who sits on the ECB’s rate-setting committee as governor of Ireland’s central bank. “I’m open to acting forcefully to get inflation down to our target,” he said.

Mr. Makhlouf doesn’t speak for the ECB as an institution but his comments are notable because he is considered a centrist on the spectrum between those committee members who want significantly higher rates and those who think the bank has done enough.

Mr. Makhlouf dismissed suggestions that the ECB will start cutting rates later this year as inflation declines. “I think that really is going too far…We’ll reach a point where we’re going to, then plateau,” he said.

Russia’s invasion of Ukraine nearly a year ago sent inflation skyrocketing in the eurozone and while it declined to 8.5% in January, it remains a long way above the ECB’s 2% target.

“I see the ECB as putting up interest rates after the March meeting…Even though inflation is coming down it’s still way above our target,” Mr. Makhlouf said in an interview in Berlin on Tuesday. He said the ECB would decide on interest rates meeting by meeting as new data arrives.

“We should plan for energy disruption from the war to last some time,” he said.

Write to Tom Fairless at tom.fairless@wsj.com

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