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Economist: Interest rates might climb even higher

Investment banker Peeter Koppel believes interest rates will not stop climbing just yet. Talking about inflation, he said that past experience suggest the second wave might be worse than the first.

Koppel, who commented on the economic situation on the "Vikerhommik" radio show, said that inflation is like toothpaste as it is very difficult to put back in the tube.

"Looking back in history, there seems to be a pattern where not just viruses spread in waves, but also inflation, whereas the second wave tends to be worse than the first. We may have seen the height of the first wave," Koppel suggested.

The economist said there is no guarantee there will be a second wave, while such a pattern has repeated many times in history.

Talking about the ECB's policy of hiking base rates to rein in inflation, Koppel said that the Eurozone is nowhere near where the interest rates should be to contain inflation, in purely technical terms.

He said that the central bank's base interest rate should be above inflation for around three quarters.

"I would refrain from dropping numbers, scaring people, while everyone can do the math for themselves. I simply consider it likely that the rates will be hiked again and more than is currently believed," head of investments at Redgate Capital said.

Koppel added that he hopes the ECB will make sure not to completely suffocate the economy in its attempt to recreate price stability.

He said that it is too late to try and fix home loan interest rates now, which is also an expensive option to begin with.

The analyst said the real estate will keep getting cheaper as loan money gets more expensive.

Koppel said that the situation today is of relatively few transactions, sellers are asking too much, while buyers are not willing to pay it. The question is which will buckle first, which is when we'll know the price level.


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Editor: Marcus Turovski

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