ECB Rate Hikes Can Stop ‘in a Couple of Months’ if Disinflation Continues, Centeno Says

31 May 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – The European Central Bank can stop raising its key interest rates in a couple of months if data continue to point to strong disinflationary tendencies, Governing Council member Mário Centeno said on Wednesday.

In an interview with Spanish business daily newspaper El Economista, Centeno, who heads the Bank of Portugal, described yesterday’s surprisingly weak Spanish inflation data as ‘very positive’, and said ‘we must continue in that direction so that interest rates can stop rising in a couple of months.’

‘The market is already factoring in two 25bp hikes in June and July, but we have to see what the numbers say’, he said. ‘If price stability is achieved, predictability can be attained, and the Euribor could start to decline in 2024’, he predicted.

He believed ‘that a recession can be avoided’, but said that ‘on order to prevent the economy from suffering excessively, we must enter a period of price predictability that is not currently guaranteed.’