ECB’s Centeno: Current State of Euro Area Economy Requires Rate Cut

2 October 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Mário Centeno said on Wednesday that the Eurozone’s sluggish economy needed another ECB rate cut to avoid undershooting inflation.

In an analysis of the evolution of inflation on the website of the Banco de Portugal, which he heads, Centeno said, ‘The current state of the euro area economy, along with the prevailing price and labour market conditions, necessitates a response from the ECB: a reduction in interest rates.'

The Eurozone was facing the threat of undershooting inflation, a threat exacerbated by a weak economy, he said.

‘A monetary policy that remains tight for too long risks causing inflation to undershoot its target. Speed is of the essence’, he said.

Feeble economic activity and low investment in the euro area were a side effect of tight monetary policy to fight inflation, and could have ‘lasting consequences’, according to Centeno.

The labour market was showing signs of a slowdown, suggesting the recent positive trend was about to reverse, and the ECB should not fail to observe these hints, he said.