ECB’s Centeno: No Sign of Second-Round Effects or Significant Wage Pressures in Euro Area
17 January 2023
By Xavier D’Arcy – FRANKFURT (Econostream) – European Central Bank Governing Council member Mário Centeno said Tuesday that there is currently no sign of second-round inflation effects in the euro area.
Speaking on a panel at the World Economic Forum in Davos, Switzerland, Centeno, who heads Banco de Portugal, expressed surprise at the resilience of the European economy.
He said he was ‘confident’ with regard to the inflation outlook, commenting that ‘we don’t have signs of second-round effects in Europe’.
On economic growth, he expressed optimism that the euro area could avoid a recession in 2023. ‘The economy has been surprising us quarter for quarter, the first quarter [of 2023] will most likely still be positive’, he said. According to Centeno, the main headwinds for growth are low levels of consumer and business confidence.
If sentiment improves, then the euro area could be headed for growth ‘which will not go to negative territory’, he said.
The Portuguese central banker was upbeat about the labour market, which he called ‘very very strong’ and ‘the biggest pillar of our economies these days’. The labour market was ‘very tight’ and ‘performing amazingly well’, he said.
Positive developments in the workforce are taking place ‘without very significant pressures on wages’, he commented.
High inflation levels in the context of strong labour markets have led some commentators to raise fears of a wage-price spiral in the region.
Centeno dismissed the notion that the ECB could provoke a recession in its efforts to get inflation back to target. ‘We are in a comfortable process’ of normalisation, he said, which is ‘really needed’ after years of negative interest rates.
Regarding the prospect of a renewed debt crisis, Centeno said that the euro area is ‘much stronger’ today than it was in 2008 and 2011, and that ‘no one worries about fragmentation’ in the Eurozone anymore.