ECB’s Centeno: More Confident About Disinflation, but Will Remain Prudent

7 June 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Mário Centeno on Friday said that the Council was more confident about inflation converging to target but would remain prudent in its decisions.

During a press conference after the release of the Banco de Portugal June Economic Bulletin, Centeno, who heads the institution, said, ‘This [interest rate] reduction means that the ECB, the Governing Council, is more confident in the disinflation path, but maintains very notable levels of prudence. It is good that we have policymakers who are prudent.’

The disinflation process had become clearer, he said: ‘[W]e are more confident, and that is why we took this step in the slight but effective reduction on the financial tightness through interest rates.’

Interest rate decisions would continue to be taken at each meeting and would take into account the data available on the evolution of inflation, he said.

The flash estimate for May inflation that showed an increase compared to April was not surprising, he said, noting that such movement had been predicted since September.

‘But we know that mainly because we fear inflation, we don't want it to persist, that we are sensitive to what we have agreed to call some bumps in the disinflation road', he said.

Even with variations, the disinflation trajectory was ‘very consistent’, he said, arguing that it was more important to look at the general movement than at oscillations.

‘I insist, the message is trust in the process, and therefore the decline; and prudence, because we really don't like inflation above 2%’, he said.

It was important to bear in mind that there were some upside risks to inflation, such as the increase in raw materials and in transport costs, she said.

‘This is why prudence continues to be the watchword in this journey against inflation’, he said. ‘But it is always important to maintain sufficient vigilance to be able to go through this entire path, which is demanding because there is a very high expectation that inflation will converge to 2%.’