ECB’s Centeno: Overreaction Now Can Cause Unnecessary Economic Slowdown

9 October 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Mario Centeno on Monday said that monetary policy transmission needed time to materialise and warned against being impatient and overdoing it.

In a speech at a meeting of the central banks of Portuguese-speaking countries, the text of which was posted to the website of the Banco de Portugal, which he heads, Centeno said, ‘Prudence is also essential to avoid reacting excessively and without giving time for the transmission process to materialize.'

‘An overreaction could result in an unnecessary economic slowdown and intensify risks in the financial system', he said. 'This is a difficult but crucial balance.’

‘It is necessary to monitor and act on the data and understand the delays in transmission mechanisms’, he said. ‘Only in this way can we preserve the effectiveness and credibility of our decisions.’