Several interest rate hikes expected, warns ECB chief economist

ECB has raised rates by 1.25% so far this year, while Philip Lane warns possibility of a recession in eurozone cannot be ruled out

Philip Lane: 'If we think our base case is to barely grow, a technical recession falling into a mild recession cannot be ruled out.' File picture: Sam Boal/RollingNews.ie

The chief economist of the European Central Bank (ECB), Philip Lane, has warned there will may be several interest rate increases this year and in early 2023 before they are brought back to what he described as a "more normal level".

In an interview with RTÉ Six One News, Mr Lane said the possibility of a recession in the eurozone cannot be ruled out.

The ECB has raised rates by 1.25% so far this year, with Mr Lane indicating that there is more to come.

"Over the next several meetings which, if you like, might mean the last months of this year plus going in to the early part of next year, we think we are still in a phase of bringing interest rates up to what might be called a more normal level."

The ECB has forecast the eurozone economy could stutter to a halt this year. Mr Lane said our base case is that the economy is likely to "stagnate". 

"That is to barely grow. So more or less to be flatlining at the end of this year and the early part of next year. So if we think our base case is to barely grow, a technical recession falling into a mild recession cannot be ruled out."

He said that supports should be allocated to people who need them to cope with rising energy prices. However, they should also be temporary.

Mr Lane added that governments will have to devise methods to balance this with those who can afford to pay higher energy prices.