‘We Probably Have To Go Further in Order To See a Reversal in Core Inflation’, ECB’s Vasle Says
17 July 2023
By Xavier D’Arcy – FRANKFURT (Econostream) – The European Central Bank probably needs to go further in its fight against inflation to ensure a durable turnaround in underlying price pressures, ECB Governing Council member Boštjan Vasle said on Monday.
Speaking on a panel at the ECB conference on central, eastern and south-eastern European (CESEE) countries, Vasle, who heads the Bank of Slovenia, said that the region was potentially facing the danger of stagflation.
‘In the past year, we did quite a lot. The interest rate increase campaign was actually the strongest one since the establishment of the ECB, we increased our the main rates 400bp, but [looking at] the high inflation, it was the highest increase in inflation in the past years [...] we probably have to go further in order to see a reversal in core inflation and not only in headline inflation’, he said.
Considering the economic outlook for the CESEE region, he said that a ‘possible scenario is that growth momentum slows down, whilst inflation remains high. So in a way we’re facing the spectre of stagflation.’
Monetary policy ‘cannot act alone’, he said. Central banks were ‘prepared to do more if needed, but high and broad based inflation calls for other policies to react as well.’