ECB’s de Cos: Wage Pressures Continuing to Intensify, Some Measures of Expectations Have Risen

26 May 2023

By David Barwick – FRANKFURT (Econostream) – Core inflation is still high and wage developments have strengthened, whilst some measures of inflation expectations have increased, European Central Bank Governing Council member Pablo Hernández de Cos said Thursday.

In a contribution to a special edition of Spanish daily Expansión, de Cos, who heads Banco de España, said, ‘Other indicators confirm that underlying inflationary pressures remain elevated. Wage pressures have continued to intensify, firms have continued to increase their margins in some sectors and, although most indicators of medium to long-term inflation expectations are around 2%, some have risen and require continued monitoring.’

The pass-through of previous monetary tightening to financial and monetary conditions is ‘strong’, and that to the real economy is unsure, he said.

The ECB will make decisions based on the data, he said, and in any event will keep rates restrictive enough and long enough to restore price stability in a timely manner.

‘[W]e at the ECB are acting decisively to bring inflation back to the 2% target in the medium term’, he said. ‘Clearly, this process has short-term costs, in terms of reduced economic activity, but maintaining price stability is the single biggest contribution the central bank can make to ensuring solid economic growth over the longer term.’