They Said It - Recent Comments of ECB Governing Council Members
10 May 2023
By David Barwick – FRANKFURT (Econostream) – The following is an overview of key recent comments made by European Central Bank Governing Council members with respect to monetary policy. We include only comments made since the Governing Council meeting of 4 May, since which many Council members have not yet spoken publicly.
Since the last version, we have added new comments made by ECB President Christine Lagarde, ECB Executive Board member Isabel Schnabel, Bundesbank President Joachim Nagel and Bank of Greece Governor Yannis Stournaras.
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Christine Lagarde (ECB)
10 May 2023
‘There are factors that can induce significant upside risks to the inflation outlook. And we are still in a situation where uncertainty about the path of inflation is high, so we have to be extremely attentive to those potential risks, the exact list of which you will find in our latest monetary policy statement, in particular in relation to wage increases in various European countries.’
‘Under the present circumstances and based on what we have, which is the baseline of March, we know that we have more ground to cover. … our future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to our 2% medium term target and will be kept at those levels for as long as necessary. We covered a lot of ground in the last nine months, moving from minus 50bp to plus 300bp. We are continuing this hiking process. As I said, this is a journey. We have not arrived yet.’
Isabel Schnabel (ECB)
09 May 2023
‘Based on the current data, there’s no doubt we have to do more to bring inflation back to our goal of 2% in a timely manner. … We see that monetary policy is working […] but we have a lot of uncertainty about how fast and how much. We do not yet see the impact on the real economy.’
Philip Lane (ECB)
09 May 2023
‘Core is going to come down because of the fading out of energy effects and the fading out of pandemic reopening effects. But that could be a misleading signal.’
‘There’s still a lot of momentum in inflation, but later this year and ongoing a lot of this inflation is supposed to reverse, partly because of the reversal of the underlying shocks, partly because of monetary policy. There’s a lot of disinflation coming later this year.’
Joachim Nagel (Bundesbank)
10 May 2023
‘But in fact we may then be in the home stretch in the sense that we are entering the area of monetary policy that can be described as restrictive. ... We can already see the first signs that lending, for example, will be more restricted. ... There is still work to be done on the core inflation rate, but I am confident that monetary policy will have an effect. ... We are ... not finished with the rate hikes. There's still work to be done, and we just have to be persistent here.’
‘The fight against high inflation hasn’t been won yet. I could also have imagined an interest rate step of half a percentage point. But we have already announced further interest rate moves. … The inflation rate may have declined over the past months, but it continues to be far too high. And as for core inflation – that is, headline inflation excluding highly volatile energy and food prices – we are actually seeing barely any movement at all. That’s not a situation we can be satisfied with.’
François Villeroy de Galhau (Banque de France)
05 May 2023
‘We have come most of the way, even if there will probably still be some hikes. We have come most of the way, but from now on, perseverance counts more than speed. We have showed since last summer that we knew how to be rapid, we are ready to be persistent as long as it takes to beat inflation.’
Ignazio Visco (Banca d’Italia)
05 May 2023
‘The fundamental issue is that we live in a very uncertain world. We have an idea about where we’ll arrive and how, but for now it’s just an idea, we cannot know the peak rate already.’
Pablo Hernández de Cos (Banco de España)
Klaas Knot (De Nederlandsche Bank)
07 May 2023
‘Our real problem at the moment is that core inflation is still too high. … But our policy works with some delays so the biggest impacts of what we’ve done so far are still in the pipeline. That is why we have considered it responsible, and that was also my position in the meeting, to take a step back from half a percentage point to a quarter percentage point per meeting.’
Pierre Wunsch (Belgian National Bank)
Mārtiņš Kazāks (Latvijas Banka)
09 May 2023
‘I don’t think it is that clear yet [that the terminal rate will be reached in July]. We still have quite some ground to cover and further rate increases will be necessary to tame inflation. … Persistently high inflation is a bigger problem for society than a relatively short and shallow recession. Failing to contain inflation would be a failure because then the policy response in the second go would then need to be much tighter.’
Madis Müller (Eesti Pank)
05 May 2023
‘In the Governing Council of the European Central Bank, we have emphasized that interest rates must be raised as long as we can be reasonably sure that price increases will be slowing steadily to close to 2% over a reasonable period of time. In light of what we know now, this means that yesterday's rate hike decision will not be the last. If you look at the expectations of analysts who closely monitor the economy and financial markets of the euro area, they consider it likely that the central bank will raise interest rates by another 0.5% during the summer and then stop. This would mean that the 6-month Euribor interest rate, which affects the loan payments of Estonian bank customers, would probably reach close to 4% or slightly above it. However, how high the central bank actually has to raise interest rates, no one knows today, because it depends on how the economy is doing in the coming months and quarters.’
Boštjan Vasle (Banka Slovenije)
05 May 2023
‘The mood at yesterday’s meeting of the Governing Council of the ECB reflected the slight improvement in the global and domestic economies, the persistently high headline inflation and, in particular, core inflation, and the effectiveness of the rises to date in key interest rates and their transmission into the banking system. In these circumstances the Governing Council of the ECB opted yesterday for further action, and raised key interest rates at the seventh consecutive monetary policy meeting, this time by 25 basis points. The decision was also taken provisionally to discontinue the reinvestments of maturing principal under the APP as of July of this year. As before, the next steps will depend on the situation at the time, in particular on the economic and financial data, developments in core inflation, and the effectiveness of our measures. The future decisions will ensure that monetary policy will be brought to levels sufficiently restrictive for as long as it takes to achieve a timely return of inflation to its target. Here it is important that the fiscal policy measures to protect the economy against high energy prices are temporary, and do not contribute to inflationary pressures that would require a more decisive response from monetary policy.’
Yannis Stournaras (Bank of Greece)
10 May 2023
‘We are close to the end. We are not there yet, so I agree with Mrs Lagarde that we still have some way to go. We can't say yet how many increases there will be. This will depend on inflation forecasts, economic growth and financial conditions. … As things are developing today and, if nothing changes dramatically, we can say that interest rate increases will end in 2023. … Interest rates will remain where they are today or higher for a while until inflation gets very close to the 2% target. … [This time period] will not be small. As things stand today, we predict that inflation in the Eurozone will fall to 2% in 2025. Of course, it will also approach 2% in 2024 but will not reach the 2% target.’
Peter Kažimír (National Bank of Slovakia)
09 May 2023
‘Last week’s slowdown in the pace of our tightening does not mark the end of the path, nor does it say that job’s done. The development of core inflation, the continued buildup of wage pressures, and high-profit margins call for vigilance and reconfirm the need to continue on our path. Nevertheless, signs of peaking inflationary pressures, tightening of credit standards and the resilience of the European financial sector to the recent volatility in financial markets allowed us to return to what can be called “business as usual”. But as I said, the battle against inflation is far from won and there’s a plenty of ground left to cover. Based on today’s data, we will have to keep raising interest rates for longer than anticipated. So slowing down the pace to 25bp is a step that will allow us to go gradually higher for longer. Should that be necessary and warranted by incoming data. We will wait to see what the data shows in the coming months and how fiscal policy develops. The reluctance of European governments to exit non-targeted fiscal measures could create a problem to which this policy would have to respond unequivocally. It would be desired to avoid that. The jury is still out there. The recent bank lending survey confirmed that the transmission of our policies is working. Nevertheless, we can only assess the cumulative impact of higher interest rates and tightening conditions on financial markets after September. Therefore, our September forecast will be the earliest date to answer how effective our measures are and whether inflation is moving towards the target.’
Mário Centeno (Banco de Portugal)
Gabriel Makhlouf (Central Bank of Ireland)
Gediminas Šimkus (Bank of Lithuania)
03 February 2023
‘March is an intention but not a commitment. If we are talking about May, we can certainly expect it.’
‘There are some corrections of inflation expectations to the positive side. I think this shows very clearly that we are on the right track. And it is these forecasts that will help us make a decision in March.’
Robert Holzmann (Austrian National Bank)
Boris Vujčić (Croatian National Bank)