ECB’s Centeno: Easing Process Should Start Sooner Rather Than Later

29 January 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Mário Centeno on Monday said that the reduction of interest rates should start earlier and in a gradual way.

In an interview with Reuters, Centeno, who heads Banco de Portugal, said, ‘We can react later and more strongly, or sooner and more gradually. I am completely in favour of gradualism scenarios, because we have to give economic agents time to adapt to our decisions.’

There was ‘a lot of evidence that inflation is falling in a sustained way’, he said, and barring new shocks, the next to move should be to cut interest rates.  

In that scenario, continuous reductions of 25bp would be a ‘good metric’, he said.

‘[W]e don't need to wait for May wage data to get an idea about the inflation trajectory’, he said, repeating what he had told Econostream in early January.

Waiting too long to start easing could lead to deviations from the inflation target that were ‘as punishable as deviations above it’, he warned.

‘The ECB has to be, from that moment on, also a source of stimulus for economic growth in the euro area’, he said.