European Central Bank policymakers are converging on a 25 basis point interest rate hike in May, even if other options remain on the table and the debate is not yet settled, according to five sources with direct knowledge of the discussion.
The ECB has raised rates by at least 50 basis points each at six successive meetings -- the fastest pace on record -- to fight stubbornly high inflation. But a host of factors now support the case for increased caution, the sources, who declined to be named, told Reuters.
They added that the peak in rates is now in sight and that this "last mile" is safer to navigate in smaller steps. Another argument put forward for gradualism was that the ECB's deposit rate, now at 3%, is at a level which restricts growth. The sources said that some are advocating no change in May - mostly the same Southern European policymakers who did not support last month's 50 basis point increase, while others - also a small group - argue for another 50 basis point hike.Klaas Knot of the Netherlands said it was unclear whether 50 basis points would be needed or if 25 was enough.
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