ECB’s Müller: As Long as Price Pressures Remain Strong, We Must Be Patient

19 July 2024

By David Barwick – FRANKFURT (Econostream) – The European Central Bank Governing Council has to take a patient approach to easing monetary policy, given ongoing high wage growth and services inflation, Council member Madis Müller said Friday.

In a blog post on the website of the Estonian central bank, which he heads, Müller said that the Governing Council had had ‘no reason’ yesterday to change interest rates, given the lack of new developments recently, and that maintaining their current level was ‘necessary in order to alleviate the ongoing upward pressure on prices’.

‘Even at the last meeting of the Council, the statement was heard that the decision to lower interest rates in June should not be interpreted as a prelude to subsequent similar decisions that will quickly follow’, he said.

Rather, the ECB has to be sure enough that inflation will decelerate durably to 2% before cutting again, he said.

‘As long as the pressure for price increases continues to be strong according to several indicators, the ECB must also be patient in its decisions’, he said, observing that wage growth and services inflation were both still quite high and had to decline.

Overall inflation would probably continue to slow, though may pick up in the second half, he said.

Noting the somewhat slower-than-expected pace of economic growth in 2Q, Müller affirmed that ‘both the euro area's economic growth and the outlook for price increases are still broadly in line with the European Central Bank's June forecast.’