ECB’s Centeno: Monetary Policy Entering Tighter Phase, Leading Inflation to Decline

29 December 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Mario Centeno on Sunday said that tighter monetary policy would lead to clearly lower Portuguese inflation soon.

In an op-ed piece appearing in Portuguese magazine Exame, Centeno, who heads Banco de Portugal, said, ‘The work of the Eurosystem must continue. The normalisation of monetary policy is entering a tighter phase, so inflation will fall sharply in the coming months.’

Banco de Portugal’s projection calling for domestic inflation to decline from 10.3% in 4Q 2022 to 3.7% in 4Q 2023 ‘will only be achieved if the second-round effects of wages and profit margins are contained and if fiscal policy does not stimulate aggregate demand’, he said.

The economy is at full employment and public debt is greater than annual GDP, he observed, noting that ‘excess demand results in unnecessarily higher prices.’