ECB’s Herodotou: Bank Lending Survey Shows That Monetary Policy Is Restrictive

10 May 2023

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Constantinos Herodotou on Wednesday said that recent data made clear that the ECB’s monetary policy was in restrictive territory.

In a speech before a Cypriot business association, Herodotou, who heads the Central Bank of Cyprus, said that domestic inflation would ‘decrease significantly’ this year and then ease further over 2024 and 2025, chiefly because of reduced price pressure from energy and food ‘as well as due to the expected impact on demand from the rise in interest rates’ in the context of tighter ECB policy.

'The decline in inflation in the coming years also reflects the stability of long-term inflation expectations’, he said.

Still, he said, ‘inflationary pressures remain high for a very long time’ not only in Cyprus, but in the euro area in general. ‘The negative effects of prolonged and persistent inflation are significant.’

The ECB’s latest rate hike was in view of ‘these ongoing pressures and the effects of high inflation,’ he said. ‘As evidenced by recent data, especially the bank lending survey, the interest rate is at a restrictive level known as restrictive monetary policy.’