ECB’s Cipollone: Monetary Policy at ‘Real Risk’ of Becoming Too Restrictive

4 September 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Piero Cipollone on Wednesday warned about the risk of monetary policy becoming overly restrictive and harming economic activity. 

In an interview with French daily Le Monde, Cipollone was asked whether he agreed with ECB Chief Economist Philip Lane’s position that the risk of doing too much against inflation was equivalent to the risk of doing too little, to which he answered: ‘Yes, there is a real risk that our stance could become too restrictive.’

It was important for Europe that monetary policy did not weigh excessively on economic activity, he said.

‘We must ensure that inflation converges to our target without holding back the economy unnecessarily, because we desperately need investment and growth in Europe’, he said. ‘Every delay in this area puts us at a serious disadvantage.’

Recent economic data had not been encouraging, he said, underscoring risks to the euro area growth outlook.

The ECB was not committed to any rate path and would continue to set monetary policy on a meeting-by-meeting basis, he said.

Asked about a possible interest rate cut at the next Governing Council meeting, he said: ‘The data so far confirm our direction of travel and I hope that they will allow us to continue to be less restrictive.’

It was normal – and even positive – for wages to make up for lost purchasing power, he said.

‘Otherwise, I don’t see how we can sustain the recovery and, in turn, the rebound in productivity’, he said. ‘We are not seeing a wage-price spiral. It’s a natural catching-up that is healthy for the economy.'