They Said It - Recent Monetary Policy Comments Made by ECB Governing Council Members

6 September 2022

By David Barwick – FRANKFURT (Econostream) – The following is a compendium of comments made by European Central Bank Governing Council members very directly related to monetary policy’s next steps. We only include forward-looking comments made recently enough to be current. Updates are made on a periodic basis.

This version supersedes the one published on 05 September, to which we have added comments from Banco de Portugal Governor Mario Centeno, Latvijas Banka Governor Mārtiņš Kazāks and Central Bank of Malta Governor Edward Scicluna.

Christine Lagarde (ECB)
23 July 2022

‘We will keep raising rates for as long as necessary to bring inflation down to our target over the medium term. We also recognise that Europe is facing great uncertainty, not least over the war and energy prices. As the economy evolves and responds to the many challenges from outside and within, the Governing Council will review the situation and decide on the right pace for our next steps depending on the incoming data.’

21 July 2022

‘I think if you go back to the monetary policy statement you see very clearly that from now on we will make our monetary policy decisions on a data-dependent basis, will operate month by month and step by step. So what happens in September is going to depend on what data we have for September, but we are definitely on a normalisation path, in order to reach our medium-term objective of 2%. We will determine in September on the basis of the data that we receive - and this is an [ECB staff macroeconomic] projection exercise in September. So on the basis of the data that we receive at the time of those projections, we will determine what step we take on the normalisation path that we are taking in order to deliver on our medium-term 2%. Now, that doesn't mean to say that we are changing the ultimate point of arrival. We are accelerating the exit, and we are following the path of normalisation that we have flagged.’


Isabel Schnabel (ECB)
27 August 2022

‘We are witnessing a steady and sustained rise in medium and long-term inflation expectations in parts of the population that risks increasing inflation persistence beyond the initial shock.’

‘Both the likelihood and the cost of current high inflation becoming entrenched in expectations are uncomfortably high. In this environment, central banks need to act forcefully. They need to lean with determination against the risk of people starting to doubt the long-term stability of our fiat currencies. Regaining and preserving trust requires us to bring inflation back to target quickly. The longer inflation stays high, the greater the risk that the public will lose confidence in our determination and ability to preserve purchasing power.’

18 August 2022

‘Our monetary policy decisions are guided by the inflation outlook. We are currently seeing very high inflation rates. Our latest projected inflation numbers were also quite high and the factors driving inflation are not disappearing anytime soon. This is why in July we embarked on monetary policy normalisation, which has just started and which is going to continue. In July we decided to raise rates by 50 basis points because we were concerned about the inflation outlook. At the same time, we shifted to a meeting-by-meeting approach, which means that any decision is going to be taken on the basis of incoming data. If I look at the most recent data, I would say that the concerns we had in July have not been alleviated.’

‘In July we decided on a 50 basis point hike in light of the inflation outlook. At the moment I do not think this outlook has changed fundamentally.’


Philip Lane (ECB)
29 August 2022

‘A steady pace (that is neither too slow nor too fast) in closing the gap to the terminal rate is important for several reasons. First, there is uncertainty about the transmission of policy rate changes to overall financing conditions, such that it makes sense to allow the financial system to absorb rate changes in a step-by-step manner. In particular, the same cumulative rate hike over a fixed interval is less likely to generate adverse feedback loops (that in turn could pose new risks to price stability) if it takes the form of a multi-step calibrated series rather than a smaller number of larger rate increases. Of course, in calibrating a multi-step series, the appropriate size of the individual increments will be larger the wider the gap to the terminal rate and the more skewed the risks to the inflation target. Second, the current high uncertainty about inflation dynamics and monetary policy transmission means that a multi-step adjustment path towards the terminal rate also makes it easier to undertake mid-course corrections if circumstances change. While upside risks to inflation are currently more intense than downside risks, if the incoming data (new shocks, updates on the relative strength of opposing adjustment forces) call for a downward shift in the terminal rate, this would be easier to handle under a step-by-step approach. Such risks not only include downside scenarios to the economic outlook but also external factors that could tighten financing conditions independently of domestic monetary policy actions (such as the spillover impact of monetary policy tightening in other countries or shifts in risk sentiment in global markets). For this reason, even if the general direction of monetary policy is shaped not only by the centre of the risk distribution but also by the current net upside skew, the agility to adjust the scale and speed of interest rate hikes remains vitally important.’


Luis de Guindos (ECB)
29 July 2022

‘From now on, we will analyse the situation within the Governing Council on a meeting-by-meeting basis depending on the data we receive. … the main factor that will guide our decisions will be the evolution of inflation.’


Fabio Panetta (ECB)
23 August 2022

Any monetary policy adjustment ‘needs to be strictly data dependent, taking fully into consideration the condition of the euro-area economy. This implies first of all to be fully aware that the probability of a recession is increasing in the euro area…’


Pablo Hernández de Cos (Banco de España)
26 July 2022

‘This 50-basis-point increase brings forward the exit from negative interest rates, but does not imply an increase in the terminal level of the rate path. The pace at which we approach that level will be determined by the data we see in the coming meetings and how they affect our medium-term inflation target of 2%. In other words, interest rate decisions will be taken at each meeting.’

22 July 2022

‘We said that we are data-dependent. This is the verbatim phrase that we have to repeat … until satiety. In September we will see, we will analyse the economic evolution of the next six weeks, of the entire month of August. In September I remind also that we will have new economic projections that for us are very important…’


Joachim Nagel (Bundesbank)
30 August 2022

‘As I see it, a larger interest rate increment reduces the risk of inflation expectations becoming unanchored. Moreover, it lowers the risk of us having to increase interest rates too drastically at a later stage. We also should not delay further interest rate moves out of fear of a possible recession. Empirical findings support this approach. Based on these findings, data from a number of countries show that “frontloading”, that is, bringing forward interest rate moves, lowers the risk of the economy suffering a hard landing.’

20 August 2022

‘Given the high rates of inflation, further interest rate steps need to be taken. This is what is generally expected, too. However, I do not want to float any particular figure. Recent months have shown that we need to take a meeting-by-meeting approach to interest rate decisions.’


François Villeroy de Galhau (Banque de France)
31 August 2022

‘After a first rate hike in July, next week we will decide on a new step: we will have to do it with determination but in an orderly and predictable way.’

27 August 2022

‘According to me, for the euro area, until we are around R*, the neutral rate—which possibly lies between 1 and 2% in nominal terms—the road ahead is clear and we can go in a sustained and determined way, including through some guidance. Doing so is normalisation, lifting our foot from the accelerator pedal. In my view, we could be there before the end of the year, after another significant step in September.’


Mārtiņš Kazāks (Latvijas Banka)
06 September 2022

‘For me, the persistence of core inflation and its impact on inflation expectations along with wage dynamics will be key to determine whether a steady pace of interest rate hikes should be maintained, going forward. On the other hand, the risks of a broad-based and protracted recession with a reductive impact on inflation would point towards a slower pace of rate hikes or a pause. Where is the end point of this policy cycle? It will be determined by the data, and what they imply for price stability.’

28 August 2022

A move of ‘at least 50 basis points would be appropriate’.

‘The increase needs to be strong and significant, and at the current moment, I would say 50 or 75 basis points.’

22 July 2022

‘I would not say that this was the only front-loading. I would say that the rate increase in September also needs to be quite significant.’

‘Given the uncertainty, given the inflationary dynamics, given the risks of persistence, I would say that of course we should be open to discussions’ about an even larger hike.


Klaas Knot (De Nederlandsche Bank)
30 August 2022

‘On policy I would like to emphasize that the broadening and deepening of our inflation problem generates the need to act forcefully. A swift normalization of interest rates is an essential first phase, and some front-loading should not be excluded. There is, however, inherent uncertainty surrounding the neutral rate as well as on the question whether going to neutral will be sufficient to bring inflation back to target. This implies that the path and end point for the policy rate remain uncertain. It would probably serve us well to simply continue raising our policy rates until the inflation outlook becomes consistent again with our symmetric 2% target over the medium-term.’


Ignazio Visco (Banca d’Italia)
28 July 2022

‘There is a risk of a recession’, in which case the ECB would ‘need to discuss what to do.’

28 July 2022

Refused to say whether September hike would be 25 or 50 basis points, said decision would be based on ‘the developments in prices and in the real economy, because the real economy affects prices. … What we see in the real economy, certainly it is not terribly encouraging.’ Said however that the worsening growth outlook isn’t so bad as to force the Governing Council to abort its tightening plans after September, because monetary conditions remain very loose.

25 July 2022

‘Well, obviously we have decided to take decisions meeting after meeting, so there is no way now to say whether it will be appropriate 50, 25 or whatever. What we have decided was to frontload an increase in interest rate that is basically a normalisation. So, we ended out from the negative interest rates and we will see, depending on data, how to go on, but clearly this does not mean that we are not going to proceed in a gradual way. Graduality means moving step by step, not being very slow.’


Robert Holzmann (Austrian National Bank):
31 August 2022

‘I see no reason to show any kind of leniency in our positioning and our wish to reduce inflation. We still see a major task in front of us and we need to address this task with determination, which means we need to move as quickly as possible toward and quite likely beyond the equilibrium interest rate.’

‘Currently for me, 75 basis points is still part of the discussion and 50 basis points the minimum.’

‘If you move now from 50 basis points to 75 basis points you could do another 75 basis points and you’d quickly be at the’ neutral rate. ‘Then you could decide if you could stay there or go further.’


Olli Rehn (Bank of Finland)
29 August 2022

‘We raised rates in July by 50 basis points. The next step will be a significant move in September, depending on the incoming data on the economic and inflation outlook. … I think it's important not to jump the gun, and let's see the figures in September. We will get the next economic projection exercise in front of us prior to the meeting. And we will have the latest incoming data in September. Then we will see. As I said, we have a clearly excessively high inflation in Europe now, and this means that according to our mandate, which is price stability, we have to act now. And monetary policy is now facing the dilemma of on one hand maintaining inflation expectations anchored, and on the other hand avoiding that we will push the economy unnecessarily to a recession because of monetary policy.’

23 August 2022

‘…the June inflation figures showed an even greater increase than we had anticipated, and so we determined that it was appropriate to take a bigger first step on the normalisation path. Going forward, the ECB’s interest rate decisions will be data driven, aiming for 2% inflation in the medium term, in line with our strategy.’


Madis Müller (Eesti Pank)
30 August 2022

‘I think 75 basis points should be among the options for September. We should not be too timid with policy moves as inflation has been too high for too long and we are still far below the neutral rate.’


Pierre Wunsch (National Bank of Belgium)
27 July 2022

Called hiking to 1.5% a ‘no brainer’, absent a ‘deep recession’. Said his preferred course of action given the economic outlook would be to raise rates in half-point increments and then maybe slow down when the deposit rate is closer to reaching 1.5%.


Boštjan Vasle (Banka Slovenije)
22 July 2022

‘Continued normalisation of monetary policy will be appropriate in the future and the exit from the negative interest rate environment allows us to move to deciding on further interest rate changes on an ongoing basis. These will depend on current developments and the analysis presented at each Governing Council meeting.’


Yannis Stournaras (Bank of Greece)
31 August 2022

‘This is why I believe in normalising policy rates only gradually, because in my view it is misguided to hike to a very high level at the risk of then having to backtrack and start cutting rates. A gradual approach is the only appropriate one.’

‘I don’t want to pre-empt our discussion in the Governing Council, but I prefer to stay gradual and flexible. After all, gradualism, optionality, flexibility are the three principles that guide our monetary policy changes.’

30 August 2022

‘In this environment, the appropriate monetary policy response has in my view been to ride out the succession of supply-side shocks, proceeding with policy normalization in a gradual but determined manner, incorporating optionality and flexibility. I believe that our approach of gradual normalization has been successful and should continue. ‘

‘In the forthcoming meetings, a further progressive normalisation of policy rates will be appropriate in order to converge to the estimated equilibrium interest rates, as we transition to a meeting-by-meeting approach. Both the timing and the pace of moves will depend on the evolution of our assessment with respect to inflation risks. Supply-side and war-related disruptions may persist. But slowing demand will act to reduce inflation. The Governing Council will need to remain attentive to all factors. A gradual or a step-by-step approach is appropriate given the surrounding high uncertainty and the supply-side nature of inflation.’


Peter Kažimír (National Bank of Slovakia)
22 July 2022

‘Thursday ended eleven years of waiting for an interest rate hike by the European Central Bank. It is the beginning of a series of similar steps that are necessary and indispensable to tame inflationary risks. How much we raise rates in September and at our next meetings will be determined by economic developments in the euro area and beyond. We can therefore expect a rise of 25 or 50 basis points in September, or, if you like, 0.25 or 0.5%.’


Mario Centeno (Banco de Portugal)
06 September 2022

‘A clear tightening or even too fast a normalization could unwarrantedly destabilize the transmission mechanism and the real economy, making it harder to achieve the inflation target beyond the short run. In face of supply shocks, monetary policy ought to be patient; more so given its unprecedented nature. The unjustified invasion of a European nation, Ukraine, by a nuclear and autocratic Russia, the persistent supply bottlenecks, and an incomplete pandemic recovery call for prudence. The new ECB’s monetary policy strategy has rightly confirmed its medium-term orientation: the inflation target is to be attained over the medium term (not at each point in time). Even with large shocks and hence unusually high levels of inflation, it is likely that this policy of slow normalization is consistent with inflation converging to target, albeit through an orthogonal mechanism to outright tightening.’

01 September 2022

‘We should be worried and act - as consumers and policymakers - about the inflation numbers we've seen. But we also have to remember the need to think longer-term in these processes...and we should be guided by patience.’

‘Pro-cyclical policies are all we should avoid.’


Edward Scicluna (Central Bank of Malta)
05 September 2022

‘A too slow withdrawal of accommodation risks entrenching a high inflation regime and prompting second-round effects on wages, further fuelling price instability and eroding households’ purchasing power. At the same, the necessary normalisation of the policy stance must be implemented considering the uncertainty prevailing in the global economy and over the level of the neutral rate of interest.’