ECB’s Centeno: Conditions for Rate Lift-Off Not Yet Satisfied
16 March 2022
By David Barwick – FRANKFURT (Econostream) – The conditions for the European Central Bank to hike interest rates are not yet met, Governing Council member Mario Centeno said Wednesday.
In an interview with CNBC, Centeno, who heads Banco de Portugal, said that the ECB would follow the stated sequence as it normalised policy according to incoming data rather than a foreordained timetable.
‘So, what it means to have a more neutral stance at this stage is to continue our path of net purchases throughout this year, evaluate the data that we have at hand’, he said. ‘Of course, inflation pressure is very high at this stage, but we don’t, we don’t see any evidence of second-round effects, and that’s precisely, I am also of the opinion that the conditions, for example for rate lift-off, are not met yet.’
‘Core inflation is driven by external factors and not by domestic factors such as wages and second-round effects’, he added. ‘Indeed, the ECB forecast for wage growth was revised downward last week, and this is precisely where we are today.’
How the economy evolves depends on how long Russia’s assault on Ukraine continues and on the impact on Europe of sanctions applied to Russia.
‘That’s why we keep saying, and this is to be taken very seriously, that we extend our options, we can act in either way, depending on, on how the economy goes’, he said.
Europe’s labour market is ‘very strong’ emerging from the pandemic, he said.
'[E]ven if it’s not probably the most likely scenario today, a scenario with low growth and high inflation is not out of the possibilities in the near future, and we must be very careful’, he added.