ECB’s Centeno: Medium-Term Inflation Objective ‘Within Our Reach’ in Near Term

4 September 2023

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Mario Centeno on Monday said that restoring price stability in the near term was within reach of monetary policy.

In an analysis of current developments posted on the website of the Bank of Portugal, which he heads, Centeno said, ‘Inflation should approach 2%. In the absence of new shocks and with the materialisation of the transmission of monetary policy to the economy, the medium-term objective is within our reach in the near horizon.’

The external environment was subject to economic weakness, with recession appearing possible, he said. However, while July’s indicators were ‘not encouraging’, he said, ‘the scenario in which we avoid a recession is still at the heart of our assessments.’

Monetary policy needed to avoid overdoing it, as this threat was real, he said.

‘On the fiscal front, balance must be preserved to reduce debt in a context of low inflation and higher interest rates’, he continued. ‘Once convergence towards price stability is ensured, monetary policy should trace a predictable path of interest rate reduction, but far from the times of zero or even negative interest rates.’