ECB’s Stournaras: ‘We Should Not Continue Raising Interest Rates’
31 July 2023
By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on reiterated his opposition to further increases in euro area official interest rates.
In an interview with Chinese state-run news channel CGTN, Stournaras, who heads the Bank of Greece, noted that he had ‘said before that we should not continue raising interest rates, because a combination of still high inflation, low growth, uncertainty and rising interest rates might cause something to break and we do not want that.’
‘That's why we are now on a thin edge’, he continued. ‘We have to be very careful with monetary policy, with fiscal policy. All policies should be available to achieve the target of bringing inflation down, but with a soft landing and financial stability, this is the important thing. It is complicated because of the uncertainty worldwide.’
The ‘main task’ was to restore price stability as quickly as possible, he said. ‘We think we will be very close to 2% into 2025’, he said. ‘We are pleased to see inflation falling. Now, of course, the question is to have a soft landing, to avoid a recession in Europe and to have financial stability, that is healthy banks. The world is complicated, full of uncertainty.’
Higher interest rates were having an impact, though less than they would were inflation demand-driven, he said. Still, tighter monetary policy had helped to contain inflation expectations and to avoid a wage-price spiral, he said.