ECB’s Stournaras: Rates to Rise Until Signs of Lower Inflation Become Certainty of Return to 2%

12 January 2023

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Thursday said that official borrowing costs would increase until incipient indications of weaker inflation were confirmed and a return to price stability was ensured.

In remarks at an in-house ceremony of the Bank of Greece, which he heads, Stournaras said that ‘[i]n the euro area, businesses, investors, employees and consumers should feel confident that, not only the Governing Council of the ECB but also everyone working in the Eurosystem, we will do whatever is necessary, within the framework of the tasks entrusted to us, to ensure a timely return of inflation to its 2% target over the medium term.’

Key interest rates ‘are expected to increase further, until the recent positive signs of a de-escalation of inflationary pressures turn into certainty of approaching the 2% target over the medium term’, he said.

Monetary policy cannot address all the factors contributing to inflation, he said, calling for ‘responsible negotiating behaviour of the social partners’.

‘It is encouraging and promising that, for the time being, there is no price-wage spiral that moves away from the 2% target, nor a dis-anchoring of medium- to long-term inflation expectations from this target’, he said. ‘This gives us hope and courage to continue our anti-inflationary policy without interest rate increases such as would cause a deep recession.’