They Said It - Recent Comments of ECB Governing Council Members

11 September 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)
04 September 2023

‘In this setting [of the past two years], it is paramount not only to take decisive action to bring inflation down, but also to communicate effectively to ensure that medium-term inflation expectations remain anchored during the process. More than ever, credibly conveying that inflation will return to our 2% target over the medium term has been vital to help prevent self-fulfilling inflationary dynamics from taking hold. This is in part because consumers are highly sensitive to some of the main drivers of the inflation we have recently seen. For instance, survey-based evidence suggests that price perceptions of food and other frequently purchased goods such as fuel have a very important influence on inflation expectations for the average euro area consumer.’

‘The current environment presents central banks with both a risk and an opportunity: people are now paying more attention to inflation, which may increase the risk of a de-anchoring of inflation expectations; but because of that higher attention, they may be more willing to listen to us, which gives us a valuable window of time to deliver our key messages.’

26 August 2023

‘We cannot, given the fact that regularities are no longer regular and we have more irregularities than regularities, we cannot exclusively rely on inflation outlook as determined by models. We have to bring into our reasoning and our considerations other elements, other measurements, including underlying inflation as we see it empirically now, as we anticipated coming up. We also need to measure the impact of our monetary policy: how fast does it produces financing, tightening and what consequences will it have? So, in a way, this the, the break of this regularities forces us to have a larger spectrum of indicators and to think in a much broader way about the consequences of what we decide.’

‘We will be very, very attentive to wage developments, because obviously, one of the strongest portion of the economy where prices are going up is services. And services is labour-intensive. Services is generally less interest rate-sensitive than others, where capital expenditures, of course, are more sensitive. So, wages as they develop will matter enormously, which is why it's critically important that inflation expectations remain anchored at 2%. If trade unions and business associations appreciate that in relatively short order, inflation will be back to 2%, they will not want to fuel more inflation by having wage or margin increases. That would not be consistent with that.’

‘We look up and down the stream of, you know, all financing channels from, you know, credit lending and money markets, sovereign bonds, the whole gambit of it to appreciate how much tightening is produced by our restrictive monetary policy. And we have to factor that into what I have called my, my three criteria, if you will, inflation outlook, underlying inflation, transmission and strength of the transmission of monetary policy.’

25 August 2023

‘The second change has been the tight labour market, which has put workers in a stronger position to recoup real wage losses. Previously, even when shocks did feed through to prices, the risk of second-round effects was contained as we were mostly operating with persistent labour market slack. But as we are seeing today, when workers have greater bargaining power, a surge in inflation can trigger “catch up” wage growth which can lead to a more persistent inflation process. We certainly cannot exclude that both these developments are temporary. In fact, we are already seeing some evidence in the euro area that firms are changing prices less frequently, although in an environment with falling energy and input prices. And it is possible that the tightness in the labour market will unwind as the economy slows, supply-demand mismatches created by the pandemic fade and, over time, digitalisation leads to higher labour supply, including by reducing entry barriers. But we also need to be open to the possibility that some of these changes could be longer-lasting. If global supply does become less elastic, including in the labour market, and global competition is reduced, we should expect prices to take on a greater role in adjustment. And if we also face shocks that are larger and more common – like energy and geopolitical shocks – we could see firms passing on cost increases more consistently. In that setting, we will have to be extremely attentive that greater volatility in relative prices does not creep into medium-term inflation through wages repeatedly “chasing” prices. That could make inflation more persistent if expected wage increases are then incorporated into the pricing decisions of firms, giving rise to what I have called “tit-for-tat” inflation.’

‘Policymaking in an age of shifts and breaks requires an open mind and a willingness to adjust our analytical frameworks in real-time to new developments. At the same time, in this era of uncertainty, it is even more important that central banks provide a nominal anchor for the economy and ensure price stability in line with their respective mandates. In the current environment, this means – for the ECB – setting interest rates at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target. And moving forward, we must remain clear in our objectives, flexible in our analysis and humble in how we communicate.’

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)

‘After more than a year of significant monetary tightening, the outlook for the euro area remains highly uncertain. Activity has moderated visibly, and forward-looking indicators signal weakness ahead. But important pockets of resilience remain, especially the labour market. Headline inflation has come down, mainly on the back of previous supply-side shocks unwinding. But underlying price pressures remain stubbornly high, with domestic factors now being the main drivers of inflation in the euro area. Therefore, a sufficiently restrictive monetary policy is critical for bringing inflation back to our 2% target in a timely manner.’

‘…the current environment of high uncertainty warrants an approach to monetary policy that is data-dependent and robust, in the sense that it considers not only the most likely future path of inflation but the entire distribution of risks. Assessing the monetary policy stance meeting-by-meeting and adjusting it when necessary will ensure that it remains appropriate at all times.’

‘Weakness has gradually spread from the manufacturing to the services sector. While strong pent-up demand for services has been able to offset the drag on growth coming from industry so far, reported orders and activity in the services sector are now declining, too. Fiscal policy is also expected to become more restrictive as governments have committed to winding down energy support measures and are expected to embark on gradual fiscal consolidation in line with guidance from the European Commission. The slowdown in aggregate demand is gradually affecting employment expectations. Although the labour market remains exceptionally tight, the recent reported decline in services firms’ intention to hire, and manufacturing firms’ intention to reduce headcount, is consistent with historical evidence of the labour market weakening only later in the cycle. In conjunction, these developments point to growth prospects being weaker than foreseen in the baseline scenario of the June Eurosystem staff projections. At the same time, there are indications that the euro area economy may not be on the brink of a deep or prolonged recession. One encouraging sign is the visible improvement in consumer confidence over previous months, even if the recovery has lately come to a halt. Confidence has improved on the back of high nominal wage growth, often including generous one-off payments, and declining energy prices, which are providing an increasing compensation for the loss of real disposable income due to the terms of trade shock. This should support private consumption in the future.’

‘The lagged effect of past policy rate increases implies that monetary policy will continue to dampen aggregate spending. Whether it will be sufficiently restrictive, however, depends on the broader macroeconomic environment in which central banks operate. For example, some of the current cyclical drivers, such as the effect of the excess build-up of inventories after the pandemic on industrial orders, may weaken or reverse over time. Similarly, a more resilient US economy may reduce the current drag on euro area exports from weak foreign demand, while a deeper slowdown in China may have the opposite effect. Moreover, some of the observed developments may be structural rather than cyclical, reflecting the secular challenges facing the euro area economy. Above all, the energy shock is still working its way through the economy and threatens to leave permanent scars on potential growth.’

‘Over the past few months, underlying inflation measures have sent mixed signals about the pace of disinflation, and hence about the shape of the Phillips curve.’

‘So, all in all, how the euro area economy will ultimately adjust to the tightening of monetary policy will crucially depend on whether consumer prices will be as flexible on the way down as they were on the way up, and on whether the imbalances in the labour market will be resolved in a way that brings wage growth back to a level in line with our 2% target, thereby containing second round effects and keeping inflation expectations anchored.’

‘The uncertainty about the pace of disinflation lends support to the data-dependent approach adopted by the Governing Council. This approach recognises that monetary policy needs to be mindful of, and responsive to, the way the economy reacts to the steepest rate hiking cycle in the history of the euro area. The lack of a historical precedent means that we can rely less on past experience. Therefore, at every upcoming meeting, we will assess whether the impact of the cumulative tightening on the future path of inflation is sufficiently strong to ensure a sustained and timely return of inflation to our 2% target, or whether the pace of disinflation is too slow for us to be confident that our current monetary policy stance can provide medium-term price stability. To ensure robustness, we will need to consider not just the baseline scenario for the inflation outlook but the entire distribution of risks. This is because even though forecast errors are starting to become smaller, there is still an exceptionally large degree of uncertainty about the medium-term inflation outlook. This can be seen when considering our latest survey of professional forecasters. Both individual uncertainty, measured by the average of the standard deviations of each respondent’s probability distribution, and aggregate uncertainty, measured by the standard deviation of the aggregate probability distribution, remain exceptionally high. And although the disagreement across survey participants, measured by the standard deviation of point forecasts, has recently declined, it still stands at more than twice the historical average since 1999. The wide range of views reflects risks in both directions. Upside risks include stronger-than-expected growth in unit labour costs, possibly driven by lower than projected productivity growth, firmer corporate pricing power and risks of new adverse supply-side shocks. If such risks materialised, inflation could subside only very gradually or could even reaccelerate. … On the downside, there is a risk that the effects of monetary policy could unfold more forcefully over the medium term. For example, while the marked increase in the share of household loans with a fixed interest rate implies that the impact of the increase in policy interest rates on households’ net interest income has been fairly limited so far, these effects could accumulate over time when more and more loans have to be refinanced at higher rates. On net, respondents in our survey of professional forecasters judge that the balance of risk for inflation in 2025 remains tilted to the upside. Moreover, respondents also see upside risks to inflation over the longer term. The distribution of inflation expectations for 2028 continues to show a fat right-hand tail, with a significant probability for inflation outcomes being above 2.5%. Option prices in financial markets also suggest upside risks to the longer-term inflation outlook. At our upcoming meetings, we will carefully weigh these and other relevant risks. Should we judge that the policy stance is inconsistent with a timely return of inflation to our 2% target, a further increase in interest rates would be warranted. In an environment of tight labour markets and structural inflationary headwinds, this would also insure against the continued elevated risk of inflation remaining above our target for too long. By contrast, should our assessment of the transmission of monetary policy suggest that the pace of disinflation is proceeding as desired, we may afford to wait until our next meeting to gather more evidence on how the slowdown in aggregate demand will feed through to price and wage-setting over time. Under this data-dependent approach, we cannot predict where the peak rate is going to be, or for how long rates will have to be held at restrictive levels. We can also not commit to future actions, meaning we cannot trade off a need for a further tightening of monetary policy today against a promise to hold rates at a certain level for longer. Such a promise would raise time inconsistency issues. If investors anticipated that the central bank in the future might renege on its promise if economic conditions change, they would not price a future path of short-term interest rates that would result in sufficiently restrictive financing conditions. Ultimately, the incoming data may well prescribe holding rates at restrictive levels over a significant period of time. The degree of restrictiveness, in turn, will also depend on the evolution of inflation expectations, as what ultimately matters for consumption and investment is real, not nominal, interest rates. The past few weeks have highlighted the pertinence of this consideration. Real risk-free rates have declined across the maturity spectrum and are now back to the level observed at the February Governing Council meeting, as investors have revised their expectations for economic growth, inflation and monetary policy. This decline could counteract our efforts to bring inflation back to target in a timely manner. By setting monetary policy meeting-by-meeting, with an open mind and based on the incoming data and an assessment of the risks to the inflation outlook, we can take such developments into account to ensure that the key ECB interest rates are set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target.’


Philip Lane (ECB)
05 September 2023

‘…what we did see is some easing in the elements of core inflation. So goods inflation and services inflation came down, which is very welcome. But, as I said, one month of data is only one piece of information; we need to see that continue. What I would say is: our calculations are basically that there were very strong price increases a year ago, which will fall out of the data this autumn. So we do expect to see this famous core inflation come down throughout the autumn. … So we do expect, with energy and food, some bumpiness. But let me summarise that as: the latest data show that inflation is standing at 5.3% overall, which remains high, but in terms of looking for signals of momentum and signals of directional change, I would underline the fact that there has been some easing in goods inflation and services inflation, which is a welcome development.’

‘…what is really important: some of the conjectures about the summer, whereby maybe we would continue to see quite strong services inflation, including coming out of the obviously still strong demand for tourism in many countries — services inflation remains significant, but the fact that there was some easing, I think, helps to limit that narrative. The most visible change over the summer was some turnaround in both the oil and gas markets. That remains a major source of uncertainty. As you know, in some of the gas markets, it has to do with some factors which may dissipate. But what I would say is that, after having seen a lot of welcome downward drift in energy inflation for most of the year, we will be keeping an eye on this situation.’

‘It’s already halved from 10 to 5, with further progress expected this year. That reflects the fact that this 10% inflation arose very quickly and had a clear connection to a number of supply factors. As those supply factors are reversed, you would expect to see some easing. But it’s also the case that it’s a multi-year process because there is a second round. And this year is really the year, we think, of peak second round. So this year, we are seeing significant wage increases. And again, the projections in June basically had an assessment that the overall wage adjustment would be multi-year: the biggest adjustment this year, where we’ve had average wages across the euro area growing north of 5%; growing north of 4% in 2024; and north of 3% in 2025. So, well above historical trends but, crucially, on a declining path: five, four, three. In the calculations for September, we’ll have to see where we are on that. That inflation, again, does not collapse to our target rate quickly because that second round has to play out to some extent. The policy challenge is to contain it, to make sure that the second round is contained and does not become embedded. So the whole challenge here is: let’s get back to 2% timely manner, to use our phrase. What is a timely manner? It’s sufficiently quickly that everyone understands that the current inflation episode is time-limited, it’s temporary, and therefore you should not change your longer-term behaviour embedding the idea that inflation would remain high. We want people to understand that this is a temporary inflation episode. It’s not going to disappear overnight, but at the same time it would be a mistake to extrapolate the high inflation we’ve seen into a longer-term projection.’

‘Our assessment for this year and the coming years is that the profit component is going to fall. That environment, which was so supportive of price increases, we don’t think it’s there and we think it’s going to get even more restrictive over time. And that’s where monetary policy is playing a role. Essentially, the interest rate policy we have is basically dampening demand. Firms know that, if they try to raise prices too much, they are going to lose too many customers. So there is a constraint on that pricing this year.’

18 August 2023

‘…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.’

11 August 2023

‘… 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.’

04 August 2023

‘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)

‘Let's see, what is the current situation … in the Eurozone? I believe that there are clear data compared to what was, for example, our projections for the month of June. There, what we were identifying as potential downward risks for economic growth have been taking shape, that is, the indicators that we have been seeing in July and August and the leading activity indicators point to a slowdown in economic activity in the third quarter and probably also … in the fourth quarter. … the services have also begun … to show weakness. That should ultimately lead to a slowdown in inflation. … Inflation has slowed down, it has slowed down a lot, but we cannot forget that our definition of price stability is 2%, and therefore we must continue to bring it down to 2%. But… what is happening… is that the economic slowdown is more visible than the slowdown in inflation, although the economic slowdown will eventually lead to a slowdown, to a further slowdown in inflation. But in economics from time to time it happens that … one of the variables needs more time to act to achieve the effect on the other. And that I think... is what is happening right now, that is, it [the economic slowdown] is more visible… than the slowdown in inflation. We’ve gotten the inflation data [for August] and the inflation data were practically the same as what we had in July.’

‘For September … the decision is open. We will have new projections, we have the data... for economic growth, they are worse than what we had projected in the month of June, that is, the downside risks have been materialising. And inflation, however, well, it’s practically very similar to what we had in June.’

‘We are entering the final stretch.’


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)
05 September 2023

‘To a degree, we have made good strides in the fight against inflation. However, we are still far from meeting our inflation target.’

‘We will discuss this [whether there will be a hike] on 14 September, including on the basis of the new projections that will then be available.’

‘The ECB Governing Council currently follows a data-dependent approach in its monetary policy decisions. That would not be consistent with enshrining a level of interest rates for longer. However, it would also be wrong to bet that rates will subsequently be quickly brought back down again after peaking.’

‘For this question [about the preferred policy option], I would prefer to stick to the data. We must keep interest rates, for as long as necessary, at a level that will contain inflation.’

‘I currently do not fear such a thing [a sustained wage-price spiral]. Inflation-adjusted, i.e. real, wages in Germany remained more or less constant in the past quarter, after having fallen significantly beforehand. Prices picked up significantly long before that. I would therefore prefer to speak of the danger of a price-wage spiral. In this environment, it is understandable that the trade unions have a good bargaining position for wage demands, especially as the labour market is more robust than many had expected just last year.’

‘Some sectors have used inflation to put up their prices sharply and thus improve their profit margins. That contributed to inflation. However, unlike before, many firms are more intent on retaining their staff owing to demographic developments and the shortage of skilled labour. The number of job openings is still high. I am therefore not overly concerned about unemployment at the moment.’

28 August 2023

‘So, we will see what we have to do in September. I will not give any signals here what we will do in September. … We will wait for the numbers, this is what we agreed in our last July meeting, then we will see what is necessary in our September meeting.’

‘So, we did something in our last meeting that we decided regarding our reserve holdings, and we changed the remuneration. And I guess this was a good move, and yes, maybe we could do more on that front.’

‘And on the economic side … we believe, or I believe, that we will have kind of a soft landing, and then we will achieve better numbers next year in 2024.’

‘…I was not so much surprised that all what we see in the second and what we might see in the third quarter [with respect to the German economy] is coming with some negative side effects, but as I said, there is a lot of light at the end of the tunnel.’

25 August 2023

‘So, we have a good labour market situation, but the economic activity is slowing, this is for sure, but this is not a surprise to me. I think when you are hiking interest rates nine times, it's, it's for sure that there is an impact on here. And we, we are seeing this, and this is good and bad news. Inflation is coming down. Core is still sticky. And so, the next months we will get more information about this.’

‘I think it's, for me, much too early to think about a pause. I think we have to wait for the next numbers. So, we agreed in our July meeting in the Governing Council that we will wait for the numbers we will see in our September meeting, and I will more or less follow this path. I will wait for the September numbers and then we will see.’

‘And when you're talking about monetary policy, what I said is that we have to be stubborn here, even more stubborn than inflation. This is what we have to do. This is our mandate. We have to bring inflation down to 2%. And I guess there's this overall understanding in the Governing Council that this is our mandate and we will more or less be pretty focused and we will do our job.’

‘I do not see that there is a hard landing scenario for, for, for Germany. I'm still pretty optimistic that we will have a soft landing. Yes, the third quarter seems to be pretty weak. But as I said, for, for next year, I'm more, more optimistic.’

‘Yes, there is that understanding that the overall inflation is coming down. It is often like that, that it takes more time for the core inflation to come down. That could be a possible scenario, but we should wait for the September numbers and then we will decide in the Governing Council what is necessary to do.’

‘First of all, we shouldn't underestimate what the Governing Council did so far. We start our rate hikes in July last year and we did a pretty good job. So, interest rates did what they do. Now they are bringing the economic activity down. Inflation is coming down. I think this is what we know from textbooks. And so, as I said, the Governing Council, I see a good team spirit in the Governing Council and I see that also for our September meeting that we will check what is telling us, what, what, what are the data is telling us. And so, this is what I'm waiting for.’

‘What I see is the, that the most effects we will see next year. So, from what we did over the last 12 months, but nevertheless, we shouldn't forget inflation is still around 5%, so this is much too high. Our target is, is, is 2%. So, there's some way to go. But as I said, coming back to my point, we have to wait for the September data and then we will draw out of that … the right decisions.’

‘So, the first PMI data, okay, they were weak, what we saw for August. But yes, as I said, we shouldn't overestimate the first data that came in. We should wait for the inflation data for, for August and for our forecast we are doing for the next months. And this is relevant to me.’

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)
06 September 2023

‘A word about the Eurozone as a whole. So, we don't see any recession today.’

‘We have had some initial successes in our battle against inflation ... but the most important virtue today is perseverance. We are clearly not at the finishing line. We must and we will ... bring inflation down to 2% by 2025.’

‘We have passed the peak of total inflation since the start of the year in the Eurozone as well as in France.’

‘So, on the variations in the price of oil, which is also being talked about a lot in recent days. They affect the monthly rhythm … but they do not call into question the underlying disinflation trend, and we are very far from a generalised shock on raw materials.’

‘...since last spring ... we have passed the peak of ... core inflation. ...And that is very important, because that is what monetary policy is effective on, that is what monetary policy is responsible for.’

‘I am not going to say today what we are going to decide on September 14. Besides, I don’t know, because our options are open at this Council meeting as well as at the next Council meeting. But I will say one conviction: I believe that we are close or very close to the high point of interest rates. ... But when I say that we are very close to the high point of interest rates, it is because today, maintaining rates long enough counts more than increasing them significantly again. Or to put it another way, the long run is more important than the short run because there is a delay in the effectiveness of monetary policy.’

‘...we don't see a clear risk of recession in France. ... We don't even see any signs of a general downturn in activity.’

‘In the short term, we are even going to raise our growth forecast for France for 2023.’

01 September 2023

‘Our options are open at this meeting, as they will be at the following ones.’

‘We are close — or very close — to the peak point of our interest rates. We are still far though from the point where we could envisage cutting them.’

‘The duration matters more than the level.’

Core inflation ‘seems to be starting to turn around. This encouraging sign is still far from enough: we must and we will get inflation to 2% between now and 2025.’

‘For September, the decision is open.’

Forecasts ‘for economic growth are worse than we had projected in June, while inflation projections are similar to what we had in June.’

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)

‘I believe we are near the level where we can stop raising rates.’

‘We should avoid both overdoing and not doing enough. If you overdo there are delayed effects.’

‘We can’t exclude the possibility of new shocks but it’s not particularly elevated at this time. We need to be open to the possibility of shocks but also be prudent in guiding the return of rates’ downward.

‘I can’t distinguish a 1.8% from a 2.2%.’


Pablo Hernández de Cos (Banco de España)
30 August 2023

‘All these results [of research into the impact of inflation on household income distribution] underscore the importance of bringing inflation back to levels consistent with our 2% medium-term objective. Indeed, price stability is the best contribution that monetary policy can make to supporting sustainable economic growth and employment, and hence to reducing inequality.’

30 August 2023

‘…we at the ECB remain confident that inflation expectations are anchored.’


Klaas Knot (De Nederlandsche Bank)
06 September 2023

‘It’s too early to tell [what next week’s decision will be]. It’s going to be a close call. I haven’t seen the projections yet, which are one important element. They will also tell us something about the force of transmission of the measures that we already took in the past. One question I will have is on wages and the potential for profit margins to absorb the higher wages that we see in several euro-area countries. We all know that this is in a sense a pivotal meeting. There’s no longer the automaticity which was there before the summer – that each time we arrived in Frankfurt, we had some unfinished business and therefore, there was an automatic expectation that we would hike. That’s no longer the case. We’ve reached the finessing phase of the tightening cycle. Tightening – a further hike – is still a possibility, but not a certainty.’

‘Maybe, yes [markets have been too willing to price out a hike]. Markets are quite volatile in their response and I’m still surprised sometimes by the force with which markets respond to certain words. At the same time I think this is also a reflection of the genuine uncertainty there is. The markets are struggling. They’re probably going through a similar struggle we will have to go through next week. But I can assure you at the end of the struggle, there will be a decision.’

‘As far as the projections are concerned, I don’t expect much of a change for inflation. But there will be some action on the activity front. If you look at the real economy, the weakness in manufacturing is now spilling over to services. And the external environment with China is clearly also posing some challenges. At the same time, there is still resilience in the labor market, real incomes are beginning to recover, housing markets seem to have bottomed out. So there are also some positive aspects there. How that will pan out in terms of the overall activity outlook I still need to see. As for transmission and inflation, those are very much related to recent developments on the wage front and corporate-pricing behavior. I expect there to be some in-depth analysis on this at the table next week. While there are still important inflation risks, at the same time indicators of underlying inflation seem to have plateaued, services inflation is easing a bit. Through base effects, one can expect core inflation to come down significantly in the fall. So there are some green shoots there. Of course, when it comes to erring on the one side or the other, I continue to think that hitting our inflation target of 2% at the end of 2025 is the bare minimum we have to deliver. My preference would be to do it sooner rather than later.’

‘I look at the June projections thinking we’re roughly on target at the end of 2025. I won’t argue about 2.1%, 2% or 1.9%. I would clearly be uncomfortable with any development that would shift that deadline even further out. And I wouldn’t mind so much if it shifted forward a little bit given that we’ve had elevated and well above target inflation already since the middle of 2021.’

‘Ultimately it [whether hiking in October instead of September will be harder] depends on how that [economic] weakness translates into inflation because we have a single mandate which is inflation. And there are also other factors impacting inflation. It’s quite crucial in the disinflation process toward 2% by the end of 2025 that wage growth decelerates visibly. If I look at current wage agreements, they are still pretty far off longer-run compatibility with a 2% inflation target plus half a percent productivity growth. If in the meantime information becomes available which would put into doubt whether that disinflation trajectory can indeed materialize, then of course we could hike at any moment, even if it were to be against the background of a deteriorating economy. We have to keep our eyes on the ball and the ball for us is inflation. Dampening demand is a feature of our policy. It’s not a bug.’

‘There is no perfect measure of inflation expectations. If you look at the survey-based ones, they seem to be more stable and close to 2%. But you have to look at the entire set of indicators. And if you do that, I would say that inflation expectations are still well anchored, even though some of them are – let’s say – on the upper end of where I’m comfortable with.’

‘I would no longer adhere to the statement that there is a greater likelihood of inflation surprising on the upside than on the downside. I think these likelihoods are pretty well balanced at this moment.’

‘Our balance sheet is already shrinking, quite significantly, and it has shrunk over the last few months. I’m pleased to observe that that has not given rise to any sort of irregularities or discontinuities. So the market has absorbed it quite well. That’s encouraging to see. That said, the last time we took a decision on PEPP reinvestments was in December 2021. There’s no denying that the world today and the inflation outlook is quite different from the outlook we had in mind back then. The rationale for continuing the reinvestments is becoming weaker. But at the same time, we also know that reneging on earlier guidance has a cost. At this moment I don’t think we should incur this cost. But of course, there could be circumstances in which that would be different.’

05 September 2023

‘…further strains in financial markets cannot be ruled out in the months ahead as higher debt servicing costs continue to permeate the economy.’

‘The global economic recovery is losing momentum, and the effects of the rise in interest rates in major economies are increasingly being felt. So far, the global financial system has remained resilient overall, not least thanks to the strong bank capital buffers introduced by the post-crisis G20 reforms. Going forward, it will be important for authorities to closely monitor asset quality in those sectors most sensitive to interest rate increases – such as real estate – and to ensure that financing providers to those sectors manage their risks properly and remain resilient.’

‘The individual cases of banking sector stress earlier this year were a stark reminder of the speed with which vulnerabilities can be exposed in the current environment.’


Pierre Wunsch (Belgian National Bank)
02 September 2023

‘I’m inclined to say we maybe need to do a little bit more.’

‘The idea that we’ll have to come to a pause at a certain point can’t be excluded.’


Mārtiņš Kazāks (Latvijas Banka)
26 August 2023

‘Given the information that we have now - and there is of course more data to come - I would say that another modest increase would be playing it safer, rather than delaying it and then risking having to do much more later in the year or early next year.’

‘We can cut rates if we raise them too much and we can cut quite soon. But if we've done too little, then we may have to raise them even more, so it's cheaper to do it sooner than later.’

‘I would be happy to start cutting the rates when the inflation projection - so the outlook and not actual data - starts to undershoot our 2% target in a consistent manner.’

25 August 2023

‘The picture is quite mixed. If you take a look at the PMIs, then the economy is somewhat weaker than expected. Labour market, however, still remains strong. If you take a look at inflation, headline inflation has been coming down, which is good, of course, but core inflation is still quite elevated, without a very clear downward trend. So, at the current moment, I would still be in no rush to say that we are done.’

‘I would say that pausing does not mean stopping and not ever raising again. We need to see the data. We need to see the new forecast, which we will have in September. And then we will decide. But I think it's very important to take into account this kind of last-mile element. And currently, I still think that, of course, the risks are now really on both sides doing too little and doing too much. But I would still err on the side of, of raising the rates, given the current standing, what we see about the economy, because we can always cut. If, however, we stop too early, then of course, later on, it may require much larger interventions.’

‘…we very clearly have gone a long way, and most of the rate increases by far have been done. And further rate increases from today's standpoint are still going to be, if, they are going to be relatively small, and if there is going to be damage to the economy, of course, we will do very much data-dependent decisions, and if necessary, one can always retreat. But I would still think that stopping too early, it is a bigger problem rather than kind of being forced to cut sometimes if the economy really turns out to be somewhat weaker.’

‘Yes, it's [the impact of previous moves] still in the system, and that's one of the issues why it has to be data-dependent, one has to take it step by step, when we see how those lags work through the economy. And that's why I kind of, I wouldn't rush anything. So, let's look at the data, let's see what happens, and let's return inflation to the 2% target sooner than the end of ‘25, which is currently the end of the forecast horizon.’

‘The rates, in my view, are already in the restrictive territory. We may need to take a few more, kind of, decisions, if necessary, but we just hold on to the rates, when we see that inflation really comes back down to the 2%. And I would very much look forward to what happens with the core inflation. If the core inflation does not come down consistently, then of course there is a risk that headline pulls up back, and you don't want to have that.’

‘But I think that one should not think of very sharp rate decreases when it happens in the future. I think that would be relatively cautious, step by step, at least for two elements. One is it's quite likely that the neutral rates are higher than they used to be, at least in the medium term. And point two is we would need that policy space to counteract other negative shocks. So, I would not see it necessary to give up the policy space that quickly, so the decreases most likely are going to be relatively slower than we saw the rate rises in the last year.’

‘…I would say that we would really need to cut the rates when the inflation outlook starts to consistently undershoot our 2% target. If we converge to 2%, then why should we rush with the rate decreases?’

‘Wage growth is really strong. Of course … it kind of differs from country to country, it depends on the situation. But overall, wage growth has been quite strong. So, what we've seen, we've seen inflation affecting wage growth. What we should be very careful about is that wage growth starts to affect inflation. So, we should not allow for that. The labour market is still relatively strong. So that is one of the key reasons still to be quite concerned about the core inflation and the link from labour market to inflation. So ,that's why I said no need to rush with the monetary policy decisions, saying that well, we've done what was necessary. In my view, not yet.’

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)

‘Now, with the normalization of monetary policy, with securities purchases and long-term loans granted to banks maturing, the Eurosystem's balance sheet will decrease, which could potentially cause new challenges. When we used to take crisis measures, we often felt like we were sailing in unknown waters. Now that we are returning to a more normal environment, the route is already more familiar, but the effects of increasing and reducing the balance sheet on the economy and financial markets are not necessarily symmetrical. So far, this process has gone well, but we are still in the early stages. For this reason, the balance sheet is reduced gradually and as proactively as possible. We monitor the effects of actions closely and are ready to react to possible tensions in both the government bond and money markets.’

‘…due to the fading of the energy shock and the significant tightening of monetary policy, inflation has clearly started to slow down, and it is predicted to return to the ECB's target level of 2% during 2025.’

‘Our policy rate is currently at a level that will contain economic growth and reduce inflation. This basically means that, on current formulation, inflation is expected to slow down over time to close to our target. BUT if that "over time" time frame is stretched considerably, a prolonged period of inflation above target could raise expectations of future inflation and thereby accelerate inflation above the projected rate. If this happens, monetary policy will have to be tightened late and well beyond current expectations to reverse the trend. This in turn would have very negative consequences for the economy. Raising interest rates from current levels could accelerate the return of inflation to target. In this case, there is a risk that aggregate demand could contract unnecessarily and that inflation could fall significantly below target in the future. The difficulty, on the one hand, and the subtlety, on the other, of measuring monetary policy are due to the fact that policy has to be forward-looking, while its success is measured by looking backwards. I am therefore quite sure that in a few years' time, when we know how interest rates should have been set at the present time, the current monetary policy will perhaps be severely criticised. At the moment, however, it is still unclear, at least to me, whether the probability and risk of a mistake is higher, i.e. whether the ECB's rate hike in September would be too much of a measure or whether leaving policy rates unchanged would be too little. Thus, the line taken at the most recent Governing Council meetings remains appropriate. The Council will make monetary policy decisions meeting by meeting according to the latest available data. Future decisions will be based on the inflation outlook, an analysis of the dynamics of underlying inflation and an assessment of how the monetary policy actions already taken will be transmitted to the economy and prices.’

‘At the moment, there is no need for new credit operations that deviate from the normal framework. The policy of fixed interest and full distribution in standard operations serves as a good first line of defense against the banks' possible and surprising liquidity needs and other money market tensions.’


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)
06 September 2023

‘For weeks, financial markets, analysts, and everyone who follows central banks have been looking to answer the question, “Will the European Central Bank continue to raise key interest rates next Thursday, or not?” There is no clear answer. Nobody has it today. What we do know is new data on inflation and the labour market situation. The development of inflation in the Eurozone in August confirmed that it is clearly too early to declare victory. Inflation remains stubbornly high and inflation expectations remain too far above our 2% target. Forecasts for inflation and economic growth are yet to be updated. They remain, however, highly uncertain, given in particular the unclear outlook for wage developments. It is, therefore, necessary to take one more step. As they say, better to be safe than sorry. One option is to take a break in September and, if necessary, deliver another (hopefully final) increase by 25bp in October or December. The second option seems preferable, reasonable, to me. It is to deliver another 25bp next week and take a breather thereafter. It is a more straightforward and efficient solution. Markets receive a clearer indication about the likely terminal rate, and we have more time to evaluate whether inflation is on a sustainable downward path towards our target. We’ll see what next week brings, but if it brings an increase in rates, I certainly won’t object.’

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)
04 September 2023

‘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) economic environment shows signs of deceleration and even with recessive dimensions. The euro area economic indicators released in July are not encouraging, but the scenario in which we avoid a recession is still at the heart of our assessments.’

‘The situation calls for policies centered on the stabilising function. In the monetary dimension, the risk of “doing too much” becomes material; inflation has been falling faster than it has risen and the economy is adjusting to new financial conditions. On the fiscal front, balance must be preserved to reduce debt in a context of low inflation and higher interest rates. 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.’

30 August 2023

‘We need to be very cautious about our decisions, because a lot has been done. And also, because we know that even after pausing, financial tightening conditions will remain in place.’

‘We will only be done once inflation is on a trajectory that takes us to the 2% mark. So we need to be very clear that this is an ongoing process.’

‘The labour market in Europe is performing in a novel way... I see a degree of flexibility in the European labour market that we were not used to see in the past. This will ease wage pressures in our labour market, contrary to what we have [been used to] in the past.’

24 August 2023

‘We have to be cautious this time around because the downside risks that we identified in June in our forecast have materialised. This is an inversion of what happened throughout the pandemic recovery, because usually we have been surprised on the upside. This is in part, in my opinion, because the transmission of monetary policy is up and running. We need to take that into account in our decisions.’

‘There's plenty of data still to be made available until the September decision. We have a new forecast. That forecast that will tell us precisely how we see the transmission of our decisions into inflation and the economy going on. And we will decide in September … on that regard. But it is important to keep in mind that inflation has been falling faster than its way up. We have been successful in our mission so far. It’s, it’s probably too soon to call it as a done deal. But, but we certainly will have to, to focus on these numbers.’

‘Well, this [the slowing economy] is precisely the, the, the downside risks materializing vis-à-vis our forecasts … in June. We need to, to, to have that in mind. We need to understand that monetary policy needs to be a stabiliser in the economy. We act because, because the inflation is actually destabilising the economy, but we cannot be seen in an over- and undershooting cycle because of monetary policy. So, we need to take those numbers into account. I'm sure that … the September forecasts will make it.’


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)
31 August 2023

‘I have not made up a decision because I don't have all the data, but I would not exclude that I would go for a hike. We are not yet at the highest level; it could be that we do another hike or two.’

‘If we were to move this year to above 4% ... and inflation comes down, then we could be able, perhaps to change it already to lower rates in 2024. If that's not the case, we'll have to wait for 2025.’

28 August 2023

‘We’re not yet in the clear when it comes to inflation. … If there aren’t any big surprises, I see a case for pushing on with rate increases without taking a pause.’

‘It’s better to achieve a peak rate faster, which also means we can eventually start going lower earlier. It’s more difficult for markets to digest a stop-and-go rate path.’

‘The economy isn’t doing as well as we had hoped but at the same time, the slowdown isn’t so gigantic that we need to talk about falling into a recession. We’re looking at a stagnating economy.’

‘I’m a big advocate of starting the debate on ending PEPP reinvestments sooner than currently envisaged. I appreciate its ability to address financial market tensions, but it’s time to step up’ QT.

25 August 2023

‘My guess is that a little more should be added. But the data will decide.’


Boris Vujčić (Croatian National Bank)
01 September 2023

‘Wage pressures are still there and from the recent data we don't see them coming down in a significant way. As long as it is like that, I'm afraid that the last mile ... will be very difficult.’

‘We are reaching the terminal rate, although as we say, we don't know where it is. Nor will we know in September; we will not know probably in October or November where the terminal rate is.’

‘If the economy slows down significantly faster, that will certainly then bring inflation down faster. And then the response of the central bank is of course that it can cut either sooner or more aggressively.’

25 August 2023

‘Well, the European economy at the moment, obviously, as we see in the latest data prints, is slowing down, which is something that you could have expected. One thing to look at is how much the services sector will slow down, which is quite resilient. Labour market, though, still remains also quite resilient. We've seen that it didn't feel the consequences of a real sector slowdown so far. So, I would say that we are in a position in Europe now where the Eurozone economy is basically stagnating, while Croatia is doing a little bit better.’

‘Well, I think that it [inflation] has most likely peaked as well. And it is coming down, but it's coming down very slowly. So, what we see at the moment is that we see more signs of a slowdown in the economic activity than the inflation itself, which might have to do also with the resilient labour markets, and still, I would say, a healthy wage growth that we that we see part of it being still a catch up and part of it probably being also some kind of inflation expectations induced. So, the important thing is to look in the next prints of the data, whether we will really see a softening of the core inflation and inflation moving towards our target.’

‘Well, we are now certainly in the restrictive territory and we got into the restrictive territory by rapidly hiking the rates so far. Whether we are in a restrictive enough territory remains to be seen. And this is something that will only seen from the inflation data that will come in in the next prints.’

‘Well, this [stagflation] is where we might get and this is, I think, the main risk, as you rightly point to, we are in a situation where we see from the PMIs, recent PMIs, indications in the soft data that the economy will slow down, while we don't see that much of it in the inflation prints. However, we have been now through the summer season in Europe, where we did expect there that particularly services inflation will be still high, and it remains to be seen now as we move towards the autumn whether there will be slowing down …  in the services, whether we will feel the consequences of the slowdown in the labour market, which will be reflected also in the inflation data.’

‘I think where we are now is basically something like a stagnation picture. I don't see a recession at the moment. I mean, when I say that, I think about the real recession, not the technical two quarter data of a very mild decline in the economic activity. So, I still think that the soft landing scenario is achievable.’

‘That is, of course, the main question: how long they will have to remain where in the restrictive territory, which is restrictive enough to bring the inflation towards our medium-term target. And there is probably some kind of a trade-off in terms of how high we go in relationship how long we have to stay there. I would say that the sooner we bring the inflation down, the better, and the sooner we bring it down, we will be able to cut sooner. And this is the way how I think about where we have to go.’

‘Well, the 2% [inflation] is is something that we at the moment expect to achieve in 2025. But I'm pretty sure that by spring, let's say, next year, we will have a clearer picture of whether we are firmly on the path towards achieving that or we will have to do more.’


Gaston Reinesch (Central Bank of Luxembourg)


Constantinos Herodotou (Central Bank of Cyprus)


Edward Scicluna (Central Bank of Malta)