ECB’s Müller: Need to Be Careful as We Go About Normalising Monetary Policy

11 May 2022

By David Barwick – LJUBLJANA (Econostream) – European Central Bank Governing Council member Madis Müller on Wednesday urged caution with respect to the risks associated with the normalisation of monetary policy.

In remarks at the 30th anniversary conference of Banka Slovenije, Müller, who heads the Estonian central bank, said, ‘Of course there are risks involved in normalising the policy. Certainly we should also realise that there are and were risks involved in having very low interest rates and very accommodative monetary policy for a long time. … But of course, we need to be careful as we go about normalising the policy.’

‘We need to be gradual, as it has been also described by [ECB] President [Christine] Lagarde earlier this morning’, he said. ‘So, this is the role that we have ahead of us. We need to manage the risks, but we also have to normalise the policy…’

Speaking at the same conference, Lagarde earlier said that ‘gradualism concerning the pace of monetary policy adjustment’ would remain important, and that ‘[a]fter the first rate hike, the normalisation process will be gradual.’

Müller affirmed that the condition of the ECB’s forward guidance calling for HICP to be close to 2% for the foreseeable future had been fulfilled.

‘We’re not too far from ending asset purchases and also starting an increase in the interest rates’, he said.