ECB’s Cipollone: Should Ease Monetary Policy if Data Confirm 2% Target to be Reached

17 April 2024

By Isabel Teles and David Barwick – WASHINGTON (Econostream) – European Central Bank Executive Board member Piero Cipollone on Wednesday said that once evidence showed that price stability was close to being achieved, then it would be time to reduce interest rates.

Speaking at the IIF Global Outlook Forum on the margins of the spring meetings of the International Monetary Fund and World Bank, Cipollone said, ‘If we see that the incoming data will confirm our confidence in inflation going soon to target, it would be appropriate to remove some of the restrictive measures.’

In the near future, however, inflation was expected to remain approximately unchanged along a ‘bumpy’ path, he said.

‘We expect for the rest of the year inflation to be down more or less on this level because while there’s an underlying pressure to decline, there are some base effects that will make the road a little bit bumpy’, he said, referring to government measures to defend consumers against expensive energy.

In 2025, inflation was expected to resume declining and, by the middle of that year, to meet the 2% target, where it should stay sustainably throughout 2026, he said.

The main driver of economic recovery for 2024 would be consumption, he said, followed by investment.

All inflation components were going down, except for services, which had been sticky for the last three or four months, he said. ‘This is a common story, in the UK is the same, in the US is the same’, he said.

It was already possible to see signs of deceleration in wage growth, he said.

‘We expect part of this pressure coming from wages to be absorbed by profits, which have been high, and lastly, it’s important that we see a recovery in productivity that has been flat’, he said.