ECB’s Centeno: Monetary Policy Should Keep Up With Disinflation

3 February 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Mário Centeno on Saturday said that monetary policy should keep up with the pace of disinflation.

Speaking at Warwick Economics Summit 2024 in England, Centeno, who heads Banco de Portugal, said, ‘[I]f inflation is going down and it is coming down very fast — actually faster than it went up — monetary policy ought to respond to that.’

‘Monetary policy has been at work, but with the usual transmission lag’, he said, according to slides published on the website of Banco de Portugal.

It was necessary to keep interest rates ‘in restrictive territory’ until there was more certainty that inflation would not return, he said.

‘We will do our job in the next few months bringing stability also in this process and making sure that when interest rates need to go down, they will go down,’ he said.

Real wages would have a ‘healthy recovery’ in the future, he said, mostly driven by productivity gains.

‘The assessment of potential pressures from wages needs a comprehensive consideration of all the underlying factors of the labour market dimensions’, he noted.

Monetary policy needed to carefully assess the risk of de-anchoring expectations and of overshooting and, looking ahead, the approach should be gradual and remain data-dependent, he said.