Belgian central bank asks governor to stay on as stopgap

FRANKFURT, Jan 2 (Reuters) - The National Bank of Belgium asked Governor Pierre Wunsch to stay on in a temporary capacity after his term lapsed on Monday without the government managing to agree on his reappointment to the European Central Bank's rate-setting Governing Council.

Political wrangling among Belgium's top parties has prevented the appointment of several high ranking public officials in recent weeks. Wunsch, who also sits on the board of the Bank for International Settlements, is so far the most high profile casualty.

Intended as a stopgap measure, the central bank's Council of Regency decided to keep Wunsch in office at the request of the government, which has said it would like to retain Wunsch for another term.

The Council of Regency said it was leaning on the principle of continuity of public services to retain Wunsch, a solution it called "suboptimal."

It was unclear if this temporary measure was enough to allow Wunsch to retain his seat on the ECB's Governing Council, where he was among the first to warn about the onset of rapid inflation.

An ECB spokesman declined to comment.

"The Council of Regency responded positively to the prime minister and finance minister's request and asked Mr. Wunsch to continue to serve as governor on a temporary basis until the government takes a formal decision on his reappointment," the bank said.

In addressing their request to the Council of Regency, Prime Minister Alexander De Croo and Finance Minister Vincent Van Peteghem said they intended to reappoint Wunsch and promised that the government would soon conclude its deliberations.

Wunsch, in office since early 2019, was among the first ECB policymakers to foresee renewed inflation, calling for tighter monetary policy even when most others insisted that rapid price growth was temporary and easy monetary policy remained appropriate.

History proved Wunsch correct, and the bank embarked on an unprecedented rate hike streak in mid-2022, taking the deposit rate to a record high 4% after inflation peaked above 10%.

The bank is debating how long rates must stay so high and whether rate cuts could start around mid year as price pressures have eased. (Reporting by Balazs Koranyi; Editing by Alison Williams, Ed Osmond and Barbara Lewis)