ECB’s Centeno: Policymakers Should Not Fear Larger Cuts if They're Necessary

19 December 2024

ECB’s Centeno: Policymakers Should Not Fear Larger Cuts if They're Necessary
Mario Centeno, governor of Banco de Portugal, at the European Central Bank Forum on Central Banking in Sintra, Portugal on June 26, 2023. Photo by Sérgio Garcia/Your Image for ECB under CC BY-NC-ND 2.0.

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Mário Centeno said on Thursday that although the ECB had agreed to proceed gradually, policymakers should not fear larger cuts if they were necessary.

In an interview with MNI, Centeno, who heads the Banco de Portugal, said that the ‘[p]eople say that if you do 50 it’s because there is a problem. But it won’t be problematic. It would be problematic if we need to move and we don’t.’

The neutral rate could be between 1.5% and 2%, he said.

Within that range, the terminal rate would be determined based on the cyclical component of the economy, he indicated.

‘The cyclical position of the euro area may be worse than we are evaluating right now and that’s an issue that we need to address in our interest rate decisions’, he said.

Structural issues were not the only ones slowing down the economy, he stated.

The last mile of inflation was basically over for the ECB, according to Centeno.

Around 40bp of 2024’s inflation projection, at 2.4%, was related to fiscal measures that would be withdrawn, he said.

 

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