ECB’s Centeno: Must Be Open to Discussing Interest Rate Cuts in March

23 February 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Mário Centeno on Friday said that the Governing Council must be open to discussing interest rate cuts in the next meeting, as a lot of new information would be available then.

In an interview with Bloomberg on the margins of the Informal Ecofin in Ghent, Belgium, Centeno, who heads Banco de Portugal, said, ‘March is the date when we have the largest amount of new data in front of us — some data may tell us to discuss interest rate cuts as soon as March.’

‘I’m not saying that it is likely, but we have to be open’, he said.

Following a data-dependent and meeting-by-meeting approach meant that ‘all possibilities are open’, he said. ‘We need to look at the data.’

The fact that inflation and growth have been consistently below the ECB’s forecasts recently was a sign that downside risks had materialised, he said.

‘Inflation may even be below 2% — even if temporarily — at some point this year and then it will fluctuate around 2% — which is what we want’, he said.  

There should still be some recovery in real wages, which was a good sign and no reason for disturbance, he said. ‘In my view wage growth will still be compatible with price stability, as it was the case so far. Real wages fell by as much as 8% in the euro area.’

Moving gradually and slowly with interest rates wasn’t equal to holding them for longer and moving faster down, he said, as the impact on the labour market was different.

‘Demand is low, and the economy is not growing. If the economy doesn’t grow, prices will not go up’, he argued.

Provided that ‘the path is sustained and predictable and we are delivering on our job’, there was no need to rush to reach a neutral stance, he said.