ECB’s Centeno: Need Inflation Data Compatible With Forecast to Start Easing

3 February 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Mário Centeno on Saturday said that incoming inflation data needed to be aligned with the ECB forecasts to confirm the disinflation trajectory and allow monetary policy easing to start.

In an interview with Portuguese broadcaster SIC, Centeno, who heads Banco de Portugal, said, ‘For this expectation [of disinflation] to be solid … we need to see inflation data in the coming months remaining compatible with our forecasts.’

‘We are convinced that this will happen and therefore I think that such a new phase of the monetary policy cycle will certainly materialise and - I will use an expression that many at the ECB do not like, but which is effective - provide some relief’, he continued.

After having stabilised interest rates, he said it would be possible to ‘begin to consider the new phase that will bring interest rates to levels compatible with medium-term 2% inflation.’

‘It is an expectation that we all have, and which has very solid bases in the data we are receiving’, he said.

Progress in inflation would bring the decision to reduce interest rates closer than what was expected months ago, he said, ‘But the exact date, the data will tell.’

‘Of course, it is highly likely that the next move, finally, when we leave this state of pause in the interest rates, will be to reduce them. When will it happen? It is still uncertain, the data will determine it’, he said.

The risk of recession should always be considered, even if it was not in the current baseline scenario, he said.

‘[B]eing successful is not just about lowering inflation, it is lowering inflation without creating a recession. This risk exists, it is always present, it is not in our base scenario, but we cannot forget about it’, he said.