ECB Policymakers Should Not Take Strength of Economy for Granted, Centeno Says

9 July 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – Eurozone rate-setters should not be complacent about the strength of the economy and the labour market amidst signs of economic slowdown, European Central Bank Governing Council member Mário Centeno said on Sunday.

In an interview with Bloomberg TV, Centeno, who heads the Banco de Portugal, said it was necessary for the ECB to become more predictable in its approach to monetary policy.

‘We cannot be complacent with the very good numbers we have been receiving from the real economy, the labour market included. Because they may not last. And this is a game of balances that we need to be very good at’, he told viewers. Recent data, such as German PMIs and the ifo Business Climate Index, were ‘not very good’, and showed that the ‘economy is slowing down, inflation is coming down.’

‘One thing that we have to achieve, and again it’s a collective aim, is to become more predictable in terms of monetary policy’, he said. This would ‘reduce uncertainty, build confidence for investors, for consumers, for the economy’, he argued.

On inflation, ‘all indicators’ showed that it had peaked, he said. Headline inflation was ‘coming down faster than the way up’, whilst core prices were ‘not coming down as fast as headline inflation, but we also need to remember that in the way up it played exactly the same trajectory.’

‘Our projections right now, tell us that inflation will be well below 3% by the end of 2023’, he said. It was important that policymakers ‘keep this in mind, so that we can really be confident about the process, and act accordingly’, he said.