ECB’s Centeno: Anticipation Effect of First Rate Cut Already Impacting People

28 May 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Mário Centeno on Tuesday said that people were already feeling the impact of monetary policy easing even before the ECB’s decision to cut interest rates.

During a press conference after the release of the Banco de Portugal May 2024 Financial Stability Report, Centeno, who heads that institution, said, ‘The first reliefs in terms of interest rates are already reaching people today. Even before the ECB takes any decision, interest rates are already falling in the future markets - obviously anticipating this ECB decision - which is also essential for this market forecast to come true.’

As the disinflation process in the euro area was more and more consolidated, interest rates reductions would continue to gradually take place, he said.

‘We shouldn't want everything at once, nor can we, and we will continue to observe the data, meeting after meeting’, he said.

The ECB’s monetary policy would reach a non-restrictive level when interest rates returned to a level that was compatible with 2% inflation.

‘As [interest rates are] currently 4%, it will take time, in a positive sense, to reach 2%. Until that moment, we can always say that there is a certain degree of restrictiveness in monetary policy’, he said. ‘It is true that this restrictiveness shrinking. As soon as the first rate reduction occurs, the restrictiveness decreases.’

The fact that inflation was under control and the expectation that the ECB would start cutting interest rates soon contributed to mitigating tensions for financial stability, and Portugal ‘must be prepared to take advantage of them’, he said.