ECB’s Centeno: Should Not Expect Rapid Convergence to Inflation Target

22 November 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Mário Centeno on Wednesday said that the final phase of the process of meeting the ECB’s inflation target would be sluggish.  

In a press conference following the release of the latest Portuguese Financial Stability Report, Centeno, who heads the Banco de Portugal, said that the path towards the 2% target was slow and that ‘one should not expect a fast convergence to this rate.’

‘In this final phase of convergence, it is natural for it to be slower… And this management of expectations is crucial for the success of monetary policy and must continue to be carried out’, he said.

Until the convergence to the target had fully materialised, real interest rates would increase even if ECB interest rates stayed put, he said.

‘[W]e have to be careful and not be complacent with our decisions because in reality the financial tightening will continue for some time, even with the key interest rates at a stable level’, he said.

It was necessary to be careful in determining whether the process was successful, he said. ‘It's good to be more cautious, but it's also good to be aware that what we're doing is the right thing and in the right way. The answer right now is yes.’

‘When we look to the future, there is one dimension that particularly interests us, which is the anchoring of expectations’, he said. ‘And in recent months we have seen how these expectations remain strongly anchored around 2%.’

Inflation was not the main concern of the domestic economy at the moment, he said, but rather the intensity of the financial tightening and the low external demand for Portuguese goods were major worries.