ECB may take a softer stance on rates
2022.11.23 12:41
ECB may take a softer stance on rates
Budrigannews.com – European Union representative Mario Centeno told Reuters that the European Central Bank should slow down the interest rate hike from December and show that a 75 basis point reduction is not the norm, as inflation is likely to peak this quarter.
In July, the ECB deposit rate rose by 200 basis points to 1.5 compared to the historical minimum and increased by 75 basis points during the last two meetings and increased by 75 basis points. “The governor of the Central Bank of Portugal Centeno said: “”We are reaching a rate level that, in our opinion, coincides with stable prices in the medium term, which means that the idea of raising rates by 75 basis points cannot be implemented.”
“We are really trying to convey this forecast for the future, and I hope that the December meeting will give a very clear idea of it,” he said in an interview. “It is important to reliably complete this cycle of increases, and it is more important than the rate increase itself to convey this information to the public.” “I hope that the December meeting will be very clear.”
Centeno did not report a 50 and 25 basis point increase in interest rates next month, or they will have to increase again next year. Centeno believes that these data show that inflation will peak in the current quarter. In October, eurozone inflation was 10.6 percent and exceeded the ECB target by 2 times. He cited the results of the World Bank’s estimates, which indicate a decline in prices for food, fertilizers, energy and minerals this year.
He believes that inflation is not so high in Europe, and the salary increase, which was still significantly higher than inflation, has no effect on the second round. “This, to be honest, is positive and significantly different from what is happening in the United States, where the labor market is quite overheated on this side.” She added that the interest rate in Europe – about half of the rates in the United States – is justified by an additional structural difference.
According to Centen, the Central Bank’s main rate, which is 1.5%, is now closer to the theoretical “neutral” rate, which keep inflation under control without affecting economic growth. When he was asked about the market for estimating the maximum rate at 3, he replied that it was more difficult to determine it than the neutral rate, but he hoped that “the December meeting would be very constructive and useful in order to determine this ceiling most correctly.”
Centeno said that although he “has no doubt that it should be reduced” in order to help implement anti-inflationary monetary policies, reducing the ECB’s balance sheet over several years by buying trillions of euros in bonds would be a process of “slow, gradual” growth.
Centeno said that in December, politicians will begin discussing the procedure for stopping the reinvestment of funds under the ECB’s 3.3 trillion euro asset purchase program. However, before doing this, he should make sure that financial stability is not threatened.
