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ECB’s Centeno says interest rate close to peaking if no new shocks
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LISBON (Reuters) – The European Central Bank’s key interest rates should soon hit their peak amid efforts to bring down inflation, unless new external shocks emerge,
LISBON (Reuters) – The European Central Bank’s key interest rates should soon hit their peak amid efforts to bring down inflation, unless new external shocks emerge, ECB Governing Council member Mario Centeno said on Friday.
He told a conference that interest rates will rise until the ECB thinks inflation can be brought down to its medium-term target of 2% “as quickly as possible”.
“We are on the way to achieving it… but we cannot hesitate in this process” of controlling inflation, he said.
The ECB raised the rate it pays on bank deposits by 50 basis points to 2% on Dec. 15, moderating its policy-tightening push after two consecutive 75 bps hikes.
ECB rates “should be reaching levels very close to the highest values” of the current cycle of monetary policy normalisation, “if we are not subject to more exogenous shocks in international and energy prices”, Centeno said.
Annual consumer price growth in the euro zone slowed to 9.2% in December from 10.1% in November, data from Eurostat showed on Friday, below the 9.7% forecast in a Reuters poll.
Centeno welcomed the four-month low reading, singling out a significant slowdown in Germany. He expected “some resistance” at the beginning of this year as automatic updates to wage contracts kick in.
“In January and February there may be a kind of plateau in the inflation figure, but the expectations are that it will come down in line with the December ECB forecasts,” he said.
The ECB forecast a gradual decline in average inflation but only approaching its target within three years.
(Reporting by Sergio Goncalves, editing by Andrei Khalip and John Stonestreet)
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are influenced by central bank policies and economic conditions.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
The European Central Bank (ECB) is the central bank for the euro and is responsible for monetary policy within the Eurozone, aiming to maintain price stability and manage interest rates.
The ECB's interest rate decisions impact borrowing costs, consumer spending, and overall economic growth in the Eurozone. Changes in rates can influence inflation and financial market stability.
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