ECB’s Vasle: Market Expectations Incompatible With Price Stability

18 December 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Boštjan Vasle on Monday said that market expectations of lower interest rates were incompatible with price stability.

In remarks to Reuters, Vasle, who heads the Bank of Slovenia, said, ‘The market pricing has lowered the level of restriction and this recent accommodation priced into interest rates is inconsistent with the stance appropriate to return inflation to target.’

‘Market expectations for interest rates cuts are premature in my view, both with regard to the start of cuts and the totality of moves’, he said.

A decision to reduce interest rates would probably not come before the end of the first quarter of 2024, he said.

‘We will receive limited new data before the January meeting so it won’t be before March or April that we get more information about inflation, growth, fiscal policy and the labour market’, he said.

It was ‘appropriate to wait and observe price growth’ before reconsidering the monetary policy stance, he said.

‘Inflation could increase back already at the turn of the year, and then hover in a 2.5% to 3% corridor through the first half of next year’, he said.