Gaston Reinesch, governor of the Central Bank of Luxembourg (BCL), told RTL that other increases were possible following the decision by the European Central Bank (ECB) to increase key rates by 50 basis points.
Gaston Reinesch, governor of the BCL and member of the Council of the ECB, explained that interest rate increases will depend on the evolution of inflation, but also on the economy in the Eurozone.
"The danger of stagnation, or even recession, is not diminishing," he told RTL in an interview on Friday.
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The interest that individuals have to pay when they take out a loan or a mortgage, or the interest they receive when depositing money, has already increased, with further increases forecast in the future, warned Reinesch.
He explained the ECB's mandate is to ensure price stability, although excessive inflation can have harmful repercussions on citizens, particularly if incomes stagnate.
The rise in key rates has had a varying impact on European countries. Italy risks having to pay more for loans, for example. Due to this, the ECB launched a new tool on Thursday, the "Transmission Protection Instrument", which will ensure that the monetary policy stance is transmitted smoothly across all euro area countries.
Reinesch said the announcement would have an effect, and expressed confidence in its ability to achieve price stability across the euro zone.
In addition, he explained the tool would be used if the member states concerned respected budgetary discipline, without excessive deficits or public debts. The ECB does not have the right to carry out monetary financing.
