Question those ECB advisers who constantly say how much the central bank should raise rates
21 Apr. (EUROPE PRESS) –
The vice-president of the European Central Bank (ECB), Luis de Guindos, has expressed his confidence that inflation, both headline and core inflation, “will go down”, but has warned that the institution cannot afford a rebound in prices in a few months because this would damage the credibility of the central bank.
“There is a question that we cannot accept, both general and underlying inflation are going to slow down, but what cannot happen is that in a few months we see that there is a rise in one or the other and that we have not done our job because that would affect to our credibility”, the Spanish economist pointed out during his speech at the “La Caixa” Foundation’s Chair in Economics and Society.
Thus, the former Spanish Minister of Economy and Competitiveness has warned that in the event that the ECB loses its credibility in the eyes of economic agents, this would mean an increase in inflation expectations.
In this way, Guindos has defended that the issuing institute of the euro zone will maintain for a few months the current approach meeting by meeting or “match by match”, depending on the data received, until it is clear what the evolution of the inflation and what is the effect of the measures adopted by the central bank.
In this sense, the vice president of the ECB has indicated that, although there are other members of the Governing Council of the central bank who constantly say where they believe the terminal rate should be located, in his opinion “a much more humble attitude” would be necessary.
The Board’s decisions on interest rates will depend on the delayed effects of the implemented measures, which show their effects with a lag of between 12 and 18 months, as well as the evolution of core inflation and the data that they are being received
“If there is someone who says they know what the terminal type will be, I would not pay much attention to them because they may have a preconceived position. I have a much more open position,” Guindos pointed out, after some members of the Governing Council of the ECB have publicly expressed their support for further rate hikes during the upcoming meetings.
“I know that there are colleagues who say what the ECB should do at the next meeting, but it is not my style because also if you do not get it right, you are left in a slighted position”, he added, recalling that the decisions of the Governing Council are always made with a very high degree of consensus.
In an interview with ‘The Irish Times’, the governor of the Bank of the Netherlands, Klaas Knot, considered one of the main representatives of the most restrictive current or ‘hawks’ of the Governing Council of the European Central Bank (ECB), He was in favor of raising interest rates at the May, June and July meetings if core inflation shows no sign of easing its pressure.
“It’s too early to talk about a pause,” Knot said, admitting he was “not uncomfortable” with market projections of an additional 75 basis point rise in the price of money.
The Governing Council of the ECB is scheduled to meet on May 4 to evaluate its monetary policy and will do so again on June 15, when it will also publish its new macroeconomic projections, as well as on July 27, 2023.
