They Said It - Recent Comments of ECB Governing Council Members

24 August 2023

By David Barwick – FRANKFURT (Econostream) – The following is an overview of recent comments made by European Central Bank Governing Council members. We include only comments made since the Governing Council meeting of 27 July, but earlier comments can still be seen in versions up to that of 24 July.



de Cos (Banco de España)


de Guindos (ECB)


Centeno (Banco de Portugal)


Herodotou (Central Bank of Cyprus)


Holzmann (Austrian National Bank)


Kazāks (Latvijas Banka)


Kažimír (National Bank of Slovakia)


Knot (Dutch National Bank)


Lagarde (ECB)


Lane (ECB)


Makhlouf (Central Bank of Ireland)


Müller (Eesti Pank)


Nagel (Bundesbank)


Panetta (ECB)


Reinesch (Central Bank of Luxembourg)


Schnabel (ECB)


Scicluna (Central Bank of Malta)


Šimkus (Bank of Lithuania)


Stournaras (Bank of Greece)


Välimäki (Bank of Finland)


Vasle (Banka Slovenije)


Villeroy (Banque de France)


Visco (Banca d’Italia)


Vujčić (Croatian National Bank)


Wunsch (National Bank of Belgium)


Christine Lagarde (ECB)
30 July 2023

‘We have covered a lot of ground and have made great progress in this fight against inflation. We are moving towards our goal. We will only know when we have reached this goal – a medium-term inflation target of 2% − by looking at the economic and financial data. And we will base our actions on our assessment of these data. I hear some people say that the final rate hike will take place in September. There could be a further hike of the policy rate or perhaps a pause. A pause, whenever it occurs, in September or later, would not necessarily be definitive. Inflation must return durably to its target. We are in an environment of uncertainty and will reassess the situation and our action on a meeting-by-meeting basis.’

‘Our aim is to lower inflation and our primary mandate is to maintain price stability in the medium term. That necessarily involves a decline in activity. The ideal solution, which is known as a soft landing, is a moderate lowering of activity in tandem with a significant fall in inflation. The second-quarter GDP figures for France, Germany and Spain are quite encouraging. They support our scenario of GDP growth of 0.9% in the euro area this year.’

‘Inflation is undoubtedly falling: we were at 10.6% in October 2022 and came back down to 5.5% in June. The decline is being driven particularly by the fall in energy price inflation. And monetary policy has clearly begun to have an impact on lowering inflation. You see that in the credit data, in both the interest rates – as our fellow citizens know – and in credit volumes, which are falling, as well as in firms’ demand for loans. We are also beginning to see it in the real economy: in the real estate sector and with regard to investment. We pay close attention to the inflation felt by our fellow citizens and also look very carefully at the mechanisms underlying inflation in order to analyse the root cause of the price increase. At present, the services sector (catering, IT, telecoms, transport...) is more resistant than the others to our monetary policy.’

‘If you look at inflation expectations and the wage increases negotiated collectively and individually, there is no sign of a wage-price spiral emerging. But our projections expect firms to absorb part of the cost of the wage increases in their margins.’

27 July 2023

‘Inflation continues to decline but is still expected to remain too high for too long. The Governing Council therefore today decided to raise the three key ECB interest rates by 25bp. Our future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target. We will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction. In particular, our interest rate decisions will continue to be based on our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission.’

‘We say “our future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target. So, some of you may have noticed a slight change of a verb. And that is not just random or irrelevant. And I think it is predicated on our determination to be data dependent. So, I have said on many occasions that we had ground to cover or that we have more ground to cover. What I am saying here is that data and our assessment of data will actually tell us whether and how much ground we have to cover. So we are deliberately data-dependent and we have an open mind as to what the decisions will be in September and in subsequent meetings. Because this determination based on data might vary from one month to the other. So we might hike and we might hold, and what is decided in September is not definitive. It may vary from one meeting to the other. So I hope it is very clear that we are not in the domain of forward guidance but we are very strongly rooted in our determination to break the back of inflation and to take inflation back to 2% in the medium term on a sustainable basis. And to do that, we will be informed by data, we will analyse the data and we will then decide at that point in time. We will have the inflation outlook, we will have two readings of inflation with all the underlying dissection and understanding of it. And we will have even more understanding of our monetary policy transmission. And that will be repeated every Governing Council after every Governing Council, so that we can make sure as I said that we break the back of inflation.’

‘…transmission of monetary policy is one of the three metrics that we use in order to determine our monetary policy stance, the strength of monetary policy transmission. And we look at it that way. We see it essentially as a two-legged process. The first leg is transmission to financing at large. What is the impact on lending, lending for banks, lending by banks to both corporates and households? And we try to measure that as accurately as possible by looking at volumes of loans, by looking at rates, by looking at obviously the bank lending survey that many of you have commented on yesterday, which informs us about what banks anticipate and in which areas, in which directions they expect to either increase or reduce the volumes of loans and reassess their risks in relation to borrowers. So that’s the first leg and there are clear indications that our monetary policy is transmitted though that channel. The next one, which is the second leg, is transmission to the economy and from financing to the economy. How quickly does that move, how efficient is it. And we are really now beginning to see transmission materialising, whether you look at investment in housing, whether you look at investment altogether, there is obviously a decline on those two accounts. Still too early and there is certainly more in the pipeline, but we are definitely seeing monetary policy being transmitted and being transmitted strongly. That’s obviously the case for the first leg and it is now also beginning to be the case in the second one.’

‘But what I can assure you of is that we are not going to cut, that is a definite no! But on the other side, it could be hike, it could be a pause. And if it is a pause, it would not necessarily be for an extended period of time, because as I said, it will vary from meeting to meeting, because we continue to decide on a meeting by meeting basis every time informed by the data. I hope it is as clear as I can be, because we are, and that was absolutely endorsed by the Governing Council, which has validated this decision unanimously, determined to operate on that basis.’

‘Our key tool, our key instrument in the current circumstances, given the level of inflation that we have at the moment, is interest rates. So there will be no trade-off between either interest rates or QT. Interest rates are the main tool and the most efficient one. So it is the one that we will be using. There is the possibility of a hike, there is the possibility of a pause. It’s a decisive maybe. But don’t expect me to go one way or the other. As I said, the burden of proof is going to be the data and the ultimate point that we are determined to reach is the 2% inflation.’


Isabel Schnabel (ECB)


Philip Lane (ECB)

‘…people are very nervous when they hear, kind of, phrases about tightening kind of depressing demand, dampening demand. And what we’re trying to do is do enough that we do make sure that inflation comes back to target, but we don’t see the conditions right now – because you usually need this kind of toxic mix where firms are already weak, customers are already weak, but, you know, I think many people are in okay shape. So, they will respond to higher interest rates by reducing demand, but we don’t think it will lead into this kind of vortex that leads to a deep recession.’

‘…what’s very damaging is a deep and sustained recession. So, we don’t see that. And what we do see is that compared to where we were last year, there's a lot of reasons to believe the European economy will grow over the next couple of years. … We’re well below the level of the economy we might have expected if the pandemic had not happened, and if you like, that kind of trendline we would expect to reemerge over time. We would expect energy prices being a lot lower now. That’s not fully been arrived in people’s utility bills yet, but over time, lower energy bills will help. And now, we are seeing wages go up. So, as wages go up, the kind of very difficult situation at the end of last year, where inflation was sky-high and yet wages, were, were, had not gone up, over time, households should be in a better financial position. So, there are a number of reasons to believe the European economy will grow over the next couple of years, and the trick for us is basically to make sure demand does not add on supply. So, it’s not a question of driving demand deeply negative, it just has to grow more slowly than supply.’


‘… in overall terms, and this is what we're now seeing one year into this hiking episode, it's clearly, it's having, starting to have a visible effect on the level of demand in the economy.’

‘Well, as I just said, we're about a year into this hiking cycle, depending on how you define it. And this is really visible now, but I'm pretty sure it's going to deepen in the next number of months. So, we often think that essentially maybe the peak is around a year and a half. So, as we go into the autumn, it's going to be more visible, and it's going to continue to be working in 2024 and in 2025. So, it is a multi-year process. It helps explain why we have a medium-term focus. We do not promise that inflation drops very quickly.’


‘And what we have in our projections is inflation will come down quite a lot later this year, but getting all the way back to our 2% target, it's essentially scheduled more or less for 2025. But again, that assumes also that we deliver on our commitment. We deliver on our commitment in terms of making sure that interest rates will help that process.’

‘So, what I would say is … we have mixed messages, and this is fundamentally why monetary policy at the moment is tricky. In one direction, as we already talked about, the very rapid fall in energy prices we are confident will bring down costs across the economy. Every sector uses energy. Lower energy prices and the easier supply chains now with the bottlenecks over will push down inflation over time. On the other hand, what's happening this year is the high inflation we saw last year - I remember inflation was at 10% in the euro area last autumn - is basically pushing up wages this year. And so what we say is the domestic component of inflation coming from … rising wages, and also firms looking to … rebuild profits is pushing up underlying inflation. So, there’s forces working in the opposite directions, and this is why we're very data-dependent. You know, as we go into the autumn, we're going to be hunting … for clues, looking at the incoming data, essentially to see which of these forces is … getting stronger, which of these forces is getting weaker.’

‘So, we don't think that the profit dynamic is … over. But … we are emphasizing this is something we need to see, … that not all of the wage increases can be passed on to consumers. And so, our assessment that inflation will come down does rely on a calculation that having had a quite a lot of profitability last year, that this year and especially going into next year, firms will just have to live with lower profits.’


Luis de Guindos (ECB)


Fabio Panetta (ECB)
03 August 2023

‘With policy rates now firmly in restrictive territory, setting and communicating the direction of monetary policy has become more complex. Our monetary policy stance needs to be calibrated in a way that brings inflation back to target in a timely manner while avoiding unnecessary harm to economic activity. This is a fine line to walk, as the effects of monetary policy emerge with a lag. While our past decisions have already led to a material tightening in credit conditions and loan dynamics, their effects have yet to be felt in full across the real economy. At the same time, inflation remains elevated. Even if it is now falling as the effects of adverse supply shocks begin to fade and weaker growth eases price pressures, it will still take some time to reach levels compatible with price stability. In order to successfully complete the disinflation of the European economy, we need to flexibly adapt our policy to the evolving inflation outlook. In the current context where policy rates are around the level necessary to deliver medium-term price stability, I will argue that monetary policy may operate not just by increasing rates but also by keeping the prevailing level of policy rates for longer. In other words, persistence matters as much as level.’

‘First, the process of disinflation has been set in motion, pushing inflation expectations down. From March onwards, we have observed a consistent decline in consumer expectations for inflation over a 12-month horizon. Likewise, firms’ expectations regarding their selling prices for the coming quarter have markedly decreased from their peak of last year. Moreover, long-term inflation expectations derived from surveys have remained largely stable. This allays concerns about a wage-price spiral. And so far wage developments have been in line with our staff projections, which envisage inflation reverting to 2% by the end of 2025. Second, as supply shocks recede, pipeline price pressures are diminishing, and the risks to inflation are becoming balanced. … Underlying inflation is moderating. Inflation pressures at the early stages of the price formation process are easing, with producer price inflation (PPI) declining further in recent months. … Although core inflation is still elevated and is projected to remain around current levels throughout the summer, empirical evidence suggests that it is a lagging – not a leading – indicator of inflation. In other words, looking at core inflation today does not tell us much about where headline inflation will settle in the medium term. Just as higher energy prices seeped through the economy on the way up, they will also eventually do so on the way down. Third, as the economic outlook deteriorates, the risks to economic activity are tilted to the downside. Demand conditions in the euro area are likely to remain weak as the impact of monetary policy strengthens, governments unwind the fiscal policy measures they adopted in response to the energy crisis and the consumption impulse from excess savings fades. If downside risks to growth persist and materialise, high wage growth is less likely to be sustained. The decline in inflation could contain wage demands, and high profits may help to absorb them. And if firms start to anticipate a drop in future demand and labour needs, the economic strength represented by firms’ tendency to hoard labour could turn into a vulnerability.’

‘…we must be prudent in calibrating our monetary policy stance if we are to reach our inflation target without harming economic activity unnecessarily. It is possible that the transmission of our monetary policy might be even stronger than the staff projections indicate. The rapid increase in interest rates and the fast contraction in our balance sheet may lead to stronger effects on monetary and credit conditions, and eventually on the economy and inflation. In addition, the tightening of monetary policy is being amplified by international policy spillovers. … Emphasising persistence may be particularly valuable in the current situation, where the policy rate is around the level necessary to deliver medium-term price stability, the risk of a de-anchoring of inflation expectations is low, inflation risks are balanced and economic activity is weak. Under such conditions, relying solely on an aggressive approach to rate hikes might amplify the risk associated with overtightening, which could subsequently require rates to be cut hastily in a deteriorating economic environment.’


Joachim Nagel (Bundesbank)
28 July 2023

‘High inflation is weighing on the euro area economy - on citizens and businesses. At the same time, the labour market is robust.’

‘We expect high inflation in the euro area to weaken, but it is not yet defeated. Core inflation is persistent and therefore our monetary policy must be even more persistent. We need staying power.’

‘We will decide in September whether we need to raise interest rates further, based on the data and projections available then. We need a sufficiently high interest rate level and we need to maintain it for as long as necessary.’


François Villeroy de Galhau (Banque de France)
28 July 2023

‘The persistence of underlying inflation that remains too high justifies the additional increase in the interest rate to 3.75%, a level in Europe well below that of the American central bank (5.25/5.50). But our growing confidence in the disinflation trajectory towards 2% by 2025 is supported by the good transmission underway of our monetary policy. Given the necessary delay for full transmission, perseverance is now the first key quality. The second is pragmatism: our decisions during the coming meetings will now be open and will be entirely guided by the economic data, as Christine Lagarde indicated.’


Ignazio Visco (Banca d’Italia)


Pablo Hernández de Cos (Banco de España)


Klaas Knot (De Nederlandsche Bank)


Pierre Wunsch (Belgian National Bank)


Mārtiņš Kazāks (Latvijas Banka)
17 August 2023

‘Inflation (both in the Eurozone and also in LV) is starting to decrease, and now we can say that the rapid increase in interest rates is behind us’

‘If @ecb we also raise rates in the Council in the coming months, most likely the increase will be small’

Tuomas Välimäki (Bank of Finland)


Madis Müller (Eesti Pank)
28 July 2023

‘In general, it can be said that the slowdown in the price increase in the euro area to 5.5% in June has been quite in line with the latest forecast of the European Central Bank. At the same time, the latest news about the state of the economy in Europe has been rather worse than expected, and the near-term outlook for the economy also seems more pessimistic than a few months ago. This is indicated, among other things, by this week's news of the once again falling purchasing managers' indices, which are considered good indicators of the economy's near-term performance. When talking about the reasons for the continued rapid price increase, it is no longer possible to refer to high energy prices or other, so to speak, external factors for the euro area. The prices of various services and goods are rising, and behind this is the increase in input prices for entrepreneurs, a relatively fast increase in wage costs, but also until recently very decent profit margins. The sustained rapid rise in food prices will most likely subside in the second half of the year, as the prices of several food commodities have already fallen on the world market. However, the risks here are related to difficult weather conditions for agriculture this year, as well as Russia's decision not to fulfil the grain agreement with Ukraine. This may mean that the rise in food prices will remain high even longer. The interest rate decisions of the European Central Bank so far are clearly having an effect - the interest rates of both bank loans and deposits have risen, the volume of new loans has decreased, and apparently higher interest rates have already generally reduced demand in the economy. Bad news for exporting companies selling their goods and services outside the euro area has been the difficult recovery of the Chinese economy after the pandemic crisis and the almost 10% appreciation of the euro exchange rate against the US dollar compared to the autumn low point. However, we can talk about a still strong labour market, which is indicated by the record low unemployment in the euro area, hand in hand with a relatively brisk wage increase. We see the same in Estonia, where the economy as a whole has not yet returned to growth, but people's incomes are already growing faster than prices. Generally, a generally weak economic situation leads to slower price increases. Less demand for various goods and services also means less opportunity to raise prices. One of the key questions now is whether the already sharply increased interest rates, hand in hand with the weak economic outlook, are sufficient for the price increase in the euro area to slow down within a reasonable time to 2%, which is the inflation target of the European Central Bank. The central bank's main goal is, of course, to get price increases under control. All people and companies are acutely aware of the problems caused by the rapid rise in prices. None of us want to see such a reduction in purchasing power as the people of Estonia experienced last year. Also, fortunately, the situation is already normalising for entrepreneurs who, until recently, had serious difficulties with planning their activities due to supply difficulties and unpredictable price increases in production costs. The strength of the gradual recovery of the euro area economy also depends on the rate of price increase slowdown, in addition to the positive impetus provided by the return to stronger growth of the global economy and the improvement of people's purchasing power in the euro area. But what can be expected from the European Central Bank in the coming months and how much higher can interest rates still go? 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. However, at the current level of interest rates, the next decisions are no longer as obvious. It is not in the interest of central bankers to raise interest rates higher than necessary to control inflation. At the same time, we cannot afford to err in the other direction and risk the continuation of a rapid price increase in the long term. The search for the right balance now awaits the European Central Bank Governing Council at every next session. Including at the next meeting in mid-September, if in the meantime we have received additional information about the state of the economy and trends in price increases during the summer months. 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. There are simply too many variables that can affect the performance of the euro area economy.’


Boštjan Vasle (Banka Slovenije)
28 July 2023

‘…inflation is slowing in line with the latest macroeconomic forecasts, while core inflation remains high. Similarly, the euro area’s economic cooling has not yet been reflected in the labour market, which represents a key risk to the persistence of core inflation at a higher level for some time.’

‘The monetary policy tightening is also increasingly being reflected in the banking sector. Lending rates are continuing to increase in line with the increase in key interest rates, while lending activity has moderated sharply, mainly due to a decline in demand for loans.’

‘…I would like to stress that our future decisions will continue to ensure that interest rates are kept at sufficiently restrictive levels for as long as it takes for inflation to return to our 2% target in time. As before, each step will depend on the current situation, in particular on the economic and financial data, developments in core inflation, and the effectiveness of our measures.’

27 July 2023

‘The decision to raise interest rates again by 0.25 percentage points is the result of the data we had at today's session. The slowdown in economic growth is somewhat faster than we expected months ago, but this is accompanied by still very good data from the labour market, which remains robust in the entire euro area, as well as in Slovenia. We are even talking about a historically low unemployment rate - which is definitely something that does not translate into excessive pressure to lower prices. On the other hand, inflation is slowing down, but core inflation remains high and quite stubborn. And the third thing is the state of the financial markets and how quickly our interest rate hikes are transmitted to the banking system and other interest rates. Here the transmission is working, we don't see interference in individual countries. Based on all of the above, we have decided that it is appropriate to raise interest rates once again. Both options are open for the coming session: to continue raising interest rates if the data is relatively bad. However, if there are positive surprises in the areas I mentioned, we can decide to at least temporarily stop raising interest rates.’


Yannis Stournaras (Bank of Greece)
29 July 2023

‘It [tighter monetary policy] is working. Not as good as compared to a case where it would have been a demand-led inflation. But even in a supply-side inflation, monetary policy has helped to contain inflationary expectations, which are now very close to 2%. To a large extent, this is because of monetary policy, which also has so far prevented a spiral between wages and prices.’

‘For Europe, the main task is to bring inflation down to 2% as soon as possible. We think we will be very close to 2% into 2025. 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.’

‘That is why I 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. 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.’

28 July 2023

‘It looks like we are very close to the end of rate hikes. In any case, I think if there is one more — and I hardly see it — in September, I think we will stop there. But I also see September's 25bp as weak.’

‘[Rates will stay at peak a] few months for sure. Everything will of course depend on the economy, on the dynamics of inflation in the first place, the dynamics of the economy in the second place and the problems if any in the financial sector. Because when you raise interest rates too much, yes, for a while the banks make profits, but on the other hand, with the reduction in demand for loans from households and businesses and the strain on the economy from the increase in interest rates, this may create a new generation of red loans.’


Peter Kažimír (National Bank of Slovakia)
28 July 2023

‘Yesterday's expected and ninth consecutive increase in interest rates brought us within reach of the peak of our efforts. In other words, we are nearing the end of the tightening of the monetary policy setting necessary to restore price stability. It is great that inflation continues to fall, from the perspective of households, businesses and the economy as a whole. However, we will not see a drop to the desired level of 2% either this year or next year. In the case of Slovakia, this decline will most likely last much longer. While headline inflation continues to decelerate, primarily due to external factors, core inflation remains record high. From my point of view, this means the need for extreme vigilance in the future. It is core inflation that hides risks for overall inflation. It is the core inflation numbers that show that we have not yet won. I continue to see the risks of inflation clearly on the upside. Despite the anaemic growth of the Eurozone economy, the labour market remains "hot". The lack of people in the labour market, combined with high inflation, pushes up wages, which helps consumption and affects prices. It is the people and households with the lowest incomes who suffer the most from high prices, and the sooner we deal with high inflation, the better. We continue to live in uncertainty, both in terms of inflation and the economy. The impact of the collapse of the validity of the Black Sea Grain Agreement on prices cannot yet be fully evaluated at this time. We will see what the impact will be on the commodity market and on food prices. Endless heat and drought will also take their toll on food prices. We do not yet know the cumulative impact of tightening in full force on the economy. We are continuously evaluating it and will be smarter in the fall. The closer we are to the summit, the more important it is to comprehensively evaluate the situation. I don't have an answer for what will come in September. Today, I would say that our mission is still not accomplished and that we should continue with a firm step on the way to the top. If we were to take a break in September, it would be premature to consider it automatically the end of the cycle. This will be decided by the incoming data on the economy.’


Mário Centeno (Banco de Portugal)


Gabriel Makhlouf (Central Bank of Ireland)


Gediminas Šimkus (Bank of Lithuania)
28 July 2023

‘A pause in September doesn’t mean there won’t be hikes going forward. Perhaps there will be a pause in September, but we may need to hike again in October.’

Rates are ‘close to a peak or at the peak’.

‘I wouldn’t expect any fast cuts on interest rates. I have doubts on cuts in the first half. That doesn’t sound like a probable scenario to me.’

‘When you’re close to a peak, close to a terminal rate, there are more alternatives for decision making. It’s not immediately obvious [whether there will be a hike in September].’


Robert Holzmann (Austrian National Bank)


Boris Vujčić (Croatian National Bank)


Gaston Reinesch (Central Bank of Luxembourg)


Constantinos Herodotou (Central Bank of Cyprus)


Edward Scicluna (Central Bank of Malta)