January 17, 2019 / 7:51 AM / 7 months ago

ECB hawk Lautenschlaeger has not given up on 2019 rate hike -Politico

European Central Bank (ECB) executive board member Sabine Lautenschlaeger delivers her keynote speech during the annual regulatory conference of Austrian markets watchdog FMA in Vienna September 30, 2014. REUTERS/Heinz-Peter Bader (AUSTRIA - Tags: BUSINESS POLITICS HEADSHOT)

BERLIN (Reuters) - A recent dip in euro zone inflation and growth was anticipated so it is not enough to unravel expectations of an interest rate hike, Sabine Lautenschlaeger, the most prominent hawk on the ECB Executive Board, said in an interview with Politico.

Euro zone indicators from industrial production to sentiment readings have consistently disappointed in recent months and investors have now pushed their expectations for the first rate hike well into next year.

However, when asked if she still expected a move in 2019, Lautenschlaeger said her views had not yet changed.

“I’ll wait for the projections coming in March before I change my view,” she was quoted as saying. “I’m data-driven in this, and I think that as we are still in the environment we projected.”

The ECB has guided markets for steady rates “through” the summer but given the abrupt slowdown in growth and rising political risk, few except the most outspoken hawks appear to see a move this year as realistic.

Lautenschlaeger added that one of the debates will be about which rate to increase first given that the bank has several instruments.

The main rate, once the benchmark for the market, stands at zero but the deposit rate, which has functioned as the key rate in recent years, is at minus 0.4 percent. Most market players expect the ECB to raise the deposit rate first before moving other rates.

Lautenschlaeger added the recent dip in inflation had also been well anticipated.

“It was clear that with the base effects of the energy prices, the inflation rate would drop,” she said. “The core inflation rate didn’t dip that much.”

Reporting by Thomas Seythal; Writing by Balazs Koranyi; Editing by Francesco Canepa and Gareth Jones

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