(Bloomberg) -- Investor bets on additional European Central Bank increases in borrowing costs are logical given the present situation, according to Governing Council member Ulo Kaasik.
“It’s true the markets are expecting the interest-rate hiking cycle to continue, and looking at the current developments it’s understandable why the markets think that,” the Estonian official told Aripaev on Friday.
The remarks come less than a day after the ECB delivered a widely anticipated quarter-point rate hike to 2.5%, the second since the start of the Middle East war. Officials expect to raise borrowing costs further to contain inflation that’s hovering around 3%, with another increase possible as soon as next month, Bloomberg reported on Thursday.
With oil back above $100 a barrel, investors are now pricing in three more hikes.
“I would certainly not consider the current level very high yet,” Kaasik said. “Rather it’s a level that should not yet perhaps directly tighten economic activity too much.”