ECB’s Centeno: ‘It’s About Time to Change This Monetary Policy Cycle’

17 April 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Mário Centeno on Wednesday said that the current monetary policy cycle was ready for change.

In an interview with CNBC on the margins of the spring meetings of the International Monetary Fund and World Bank, Centeno, who heads Banco de Portugal, said, ‘So, yes, we need to look ahead and month by month, meeting by meeting, decide on the path for interest rates. But it’s about time to change this monetary policy cycle.’

Bringing inflation down entailed a cost to economic growth that the ECB must consider in its analysis, he said.

Wage growth was already compatible with the continuation of the disinflationary process, he said, but it was important to see what June data would tell.

‘June is going to be a very important decision, markets expectations are very clear for that, but we continue to be data-dependent’, he said.

Asked about the risk of an increase in oil prices, he answered that it would be taken into account, if necessary, but argued, ‘in my view, the strength of the disinflation process is strong enough to cope with these sorts of shocks that we are kind of wondering if would come or not.’

Most shocks and risks to the euro area had a deflationary nature, he said, including an increasing participation of China.

There were clear signs of decoupling between the euro area and the US, he said, meaning that the monetary policy decisions could be different in each economy.

‘[I]f we have to go to fulfil our mandate first than the US, we have to do it because that’s our mandate, to control inflation in Europe, to bring it down to 2%’, he said. ‘We need to move, if that is the case, the ECB must be ready to act.’