ROME, May 5 (Reuters) - The European Central Bank's
interest rates may be close to the level required to contain
inflation, a policymaker said on Friday, adding that the peak
expected by markets "is an important reference point" for the
central bank.
The ECB raised its key deposit rate by 25 basis points on
Thursday, bringing the benchmark for borrowing costs in the
20-country euro zone to 3.25%.
Asked what level the central bank wants to reach before
stopping the rise in the cost of money, Ignazio Visco, the
governor of the Bank of Italy, said: "It is perhaps not too far
from where we are today."
He was speaking at a book presentation.
Money market prices show investors expect another 25 bp
increase in the deposit rate next month, which would take it to
3.50%, but are less convinced the ECB will hike again after
that.
The interest rate peak, or "terminal rate" is currently
priced in at 3.65%, likely meaning that most investors expect
the ECB to raise the deposit rate to 3.75% but a sizeable
minority see it peaking at 3.50%.
The ECB is then expected to start cutting rates as soon as
early next year.
(Reporting by Giselda Vagnoni, editing by Gavin Jones)
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