ECB’s Stournaras: Interest Rates Still Need to Rise Significantly

30 December 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Friday somewhat unenthusiastically recapped recent ECB monetary policy.

In a commentary published in Greek newspaper Parapolitika, Stournaras, who heads the Bank of Greece, wrote that the Council had ‘stressed that interest rates will still need to rise significantly at a sustained pace in order to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the medium-term objective of 2%.’

‘Keeping interest rates at restrictive levels will reduce inflation over time by dampening demand and will also avert the risk of a persistent upward shift in inflation expectations’, he said.

PEPP reinvestments can be deployed flexibly as the first ‘line of defence’ to deal with threats to monetary policy transmission related to the pandemic, he said.