By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Álvaro Santos Pereira said on Friday that the ECB should assess incoming data and keep a “cool head.”
Pereira, who heads the Banco de Portugal, told MNI that “[a]t this stage we just need to see what will happen, in terms of the data. Keep our cool heads, and say, 'OK, we’ve seen supply shocks before.'”
The ECB should remain data-dependent and proceed meeting by meeting, he said.
“It’s a bit different from 2022 because in 2022 we had a significant demand shock, with some choke points and bottlenecks in certain parts of the world economy, freight rates were going up,” he said, adding that inflation was already around 5% in some European countries even before the Russian invasion of Ukraine.
He said the ECB would monitor fertilizer prices closely, warning that “in six to eight months this will have implications for food prices,” as well as potential helium shortages that could weigh on the growth of the artificial intelligence sector.
“Those are variables that we will pay very close attention to, and then afterwards see whether inflation expectations remain anchored,” he said.
Pereira said the ECB should first evaluate how the conflict evolves — whether it proves more prolonged or severe than expected — and then let the data guide its response.
“Afterwards you just need to see what the data tells us regarding the evolution. Then, I’m sure it will be a decision to act or not, but I think the most important thing is pay close attention to this data and be ready to act,” he said.
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