ECB’s Vasle: Upside Inflation Risks Remain Significant

27 October 2023

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Boštjan Vasle on Friday said that upside inflation risks were still significant.

In a statement posted to the website of the Bank of Slovenia, which he heads, Vasle noted weaker economic activity and inflation, but said that the fact that the latter is still too high ‘reinforces market participants' expectations of a longer period of high levels of key central bank interest rates.’

Although the Council yesterday decided to leave interest rates unchanged, ‘we emphasise that our further steps will continue to depend on the current situation’, he said.

Despite the slowdown of inflation last month, ‘the risks for a possible higher price increase remain significant and arise mainly from the high tightness of the labour market and the possible effects of geopolitical instability on the movement of energy prices’, he said.

The financial market impact of violence in the Middle East has been limited to date, though energy prices have reflected the deterioration of the geopolitical environment, he said.

Key ECB interest rates ‘have reached levels which, if maintained long enough, will significantly contribute to the timely return of inflation to the target level’, he said. ‘Our further steps will continue to depend on the current situation, that is, on economic and financial data, the movement of core inflation and the effectiveness of our measures.’

‘Accordingly, our decisions on a meeting-by-meeting basis will ensure that interest rate levels are sufficiently restrictive for as long as necessary to return inflation to our 2% target in a timely manner’, he added.