Portugal’s central bank governor, Mario Centeno, said on Tuesday that inflation in the euro zone is moving in the right direction, despite a more hawkish tone from members of the European Central Bank’s board in recent days. Stated.
“We’re targeting medium-term inflation, but we’re not targeting February inflation. The trajectory right now is very positive,” Centeno told CNBC at the World Economic Forum in Davos, Switzerland. he said.
“I’m not saying there’s a chance of overshoot, but we don’t need to do more than is necessary to get inflation to 2% in the medium term. Since the end of 2022, all forecasts to 2025 have been very “The outlook is positive,” he said, underscoring medium-term inflation expectations. ”
“We still rely on data and that’s how we frame our decisions…One of the ECB’s biggest successes in recent times was being able to peg medium-term inflation expectations at 2%. “This is because the ECB is trusted and we must continue to do so,” Centeno said.
He added that inflationary pressures have become domestic and most of the shocks that caused the sharp rise in inflation to 10.6% in October 2022 have subsided.
Centeno said service inflation is falling faster than it is rising, a particularly positive trend.
The comments came a day after Austrian central bank governor and ECB board member Robert Holzmann said that statistics in recent weeks were pointing in the “opposite direction” to what would normally prompt talk of rate cuts. Ta. He also said there may not be a rate cut this year, contrary to market expectations.
Holtzmann also warned that new risks from volatility in the Middle East could lead to inflation.
“We’ve been surprised by the contraction in inflation over the last three to four months,” Centeno said in response to a question about the timing of a potential rate cut. He said this was positive because it showed that tight monetary policy was working, even if there was a small error in the forecast.
“And if the economy doesn’t grow and the challenges are big, if inflation starts to fall sustainably, we need to have all the data openly and make that decision,” Centeno continued.
Centeno said that in contrast to the situation in the United States during the same period, the eurozone economy has been stagnant for five quarters and is in a “precarious” situation, “and we need to address it.”
German Central Bank Governor Joachim Nagel said: bloomberg He said on Monday that current inflation was too high to justify a discussion of cutting rates, but that summer might be the right time.