ECB’s Centeno: If Inflation Slows Down Interest Rates Will Be Reduced

19 June 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Mário Centeno on Wednesday said that the ECB would cut interest rates provided that the disinflation process continued.

During a hearing at the Portuguese Parliament in Lisbon, Centeno, who heads the Banco de Portugal, said, ‘The cycle of interest rates will continue to evolve’ and ‘Rates will fall if inflation helps us, which it’s doing.’

Interest rates should not be close to zero, he said, and approaching that level would be ‘a very bad sign.’

‘What would be ideal would be for interest rates to also approach 2%’, he said. ‘That should be, with fluctuations around those numbers, the economic and financial framework that would bring greater stability for the European and Portuguese economy in the future.’

The individual financial results of national central banks did not affect their ability to conduct monetary policy, he said.

‘If we look at the monetary policy cycle as it stands today, and what we know today about inflation and the trajectory of interest rates, we can anticipate that this cycle of negative results [for the Banco de Portugal] will continue for at least another two years, there is an expectation from all central banks that a more regular situation will resume in 2026’, he said.