ECB’s Müller: Situation Has Changed, With Next Decisions No Longer So Obvious

28 July 2023

By David Barwick – LJUBLJANA (Econostream) – European Central Bank Governing Council member Madis Müller on Friday said that the ECB was confronting a changed situation in which the next monetary policy decisions were not as clear as they had been previously.

In a blog post on the website of the Estonian central bank, which he heads, Müller said, ‘Compared to the last few sessions of the European Central Bank Governing Council, the situation has changed.’

‘In the past, the need to keep raising interest rates in order to slow down the rapid rise in prices was so clear that it was already possible to promise it in a very firm tone’, he elaborated. ‘However, at the current level of interest rates, the next decisions are no longer as obvious.’

Central banks have no desire to tighten policy more than needed for inflation, though they also can’t take the chance of doing too little, he said. The Governing Council was now faced with the task at each meeting of finding the proper balance, he said, including in September.

‘Until then, however, I don't recommend believing anyone who claims to know how high interest rates can go and when we can expect interest rates to drop’, he said. ‘There are simply too many variables that can affect the performance of the euro area economy.’