VIENNA, March 20 (Reuters) - European Central Bank (ECB)
policymaker Robert Holzmann on Monday watered down his recent
call for three further interest-rate increases of 50 basis
points in quick succession.
Holzmann, who heads the Austrian National Bank, told German
business daily Handelsblatt two weeks ago the ECB should raise
rates by 50 basis points at each of its next four meetings
because inflation was proving stubborn. The ECB made one such
increase at its meeting last week.
Asked in an interview on Austrian national broadcaster ORF
TV if he stood by that call given recent turbulence in the
banking sector, he said: "I would not rule them out but I would
also not say that they will necessarily come either."
ECB President Christine Lagarde said earlier on Monday that
financial market turmoil may do some of the European Central
Bank's work for it if it dampens demand and inflation.
That was a likely reference to how higher central bank rates
and jitters in the banking sector tend to have the same effect
by discouraging lending and cooling economic activity.
Similarly, Holzmann said that since his Handelsblatt
interview liquidity in the financial system had decreased,
referring to banking stocks' recent fall on fears of a new
banking crisis.
"What we are concerned with is fighting inflation," he said,
adding that if deflation or an inflation reduction began because
of tightening liquidity, the central bank would no longer need
to raise rates or could raise them more gradually.
Asked if UBS Group's state-backed takeover of Credit Suisse
was dangerous because it will create such a big bank in such a
small country, Switzerland, he said: "It could become dangerous
but it does not have to become dangerous."
(Reporting by Francois Murphy and Alexandra Schwarz-Goerlich;
Editing by Josie Kao)
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