ECB’s Elderson: Even If Mild Recession Materialises, Not Clear It Will Matter Much for Inflation Outlook

15 November 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Executive Board member Frank Elderson on Tuesday confirmed that interest rates would rise further, with any recession not clearly going to have a significant impact per se on inflation.

In a dinner speech in Frankfurt devoted mainly to banking supervision, Elderson said that ‘a mild recession in the euro area around the turn of the year is quite plausible’.

However, he said, for now ‘it is not evident that the observed turn in macroeconomic sentiment will substantially alter the inflation outlook, even if a mild recession were indeed to materialise.’

‘Against this backdrop, we have communicated that we will continue to promptly withdraw monetary policy support and move policy rates further to a level that is consistent with inflation reverting back to our 2% target in the medium term’, he continued.

The ECB’s key interest rates are its primary monetary policy tool, but ‘we are ready to adjust all our instruments to maintain the consistency we need in our monetary policy to achieve our primary objective of price stability’, he said. ‘Data-dependent, going meeting-by-meeting.’