(Bloomberg) — The European Central Bank must consider recent financial-market stress when taking decisions on interest rates, according to Governing Council member Mario Centeno.
(Bloomberg) — The European Central Bank must consider recent financial-market stress when taking decisions on interest rates, according to Governing Council member Mario Centeno.
While there are no signs of systemic problems in the euro zone’s banking industry, financial stability is a prerequisite for price stability, Centeno said Monday.
“Financial stability and the functioning of the monetary-policy transmission mechanism is at the core of our mandate,” Centeno, who also heads Portugal’s central bank, told an online event.
Asked whether the banking turmoil may result in a lower peak for borrowing costs, he said: “If it’s over or not, we have to see with data coming in the next few days. I don’t have to decide tomorrow. I can wait until early May.”
ECB officials are trying to balance their ongoing battle against inflation with the need to maintain stability in the euro zone’s financial sector following shocks in the US and Switzerland. Data due Friday are set to show consumer-price gains slowed steeply in February, though underlying inflation is likely to have hit another record.
Executive Board member Isabel Schnabel also said that the effects of the recent turmoil on bank lending must be assessed, while highlighting that core inflation was still high. Speaking in New York, she said “it’s not easy to answer” how restrictive rates currently are.
Earlier Monday, Bundesbank President Joachim Nagel said the ECB remains determined to bringing price growth back to the 2% target while also standing ready to respond to any potential issues in markets.
Spanish central bank chief Pablo Hernandez de Cos said separately that ECB decisions should be prudent, in light of the banking turbulence, while Lithuania’s Gediminas Simkus said that Europe’s financial system is far more robust than before the 2008 crash.
Centeno reiterated that the ECB is “closely monitoring” the banking troubles but that tackling the aftermath of the spike in prices remains the top goal.
“Our main focus right now is to control inflation and to bring it down to 2%,” he said.
–With assistance from Jonnelle Marte.
(Updates with Schnabel in sixth paragraph.)
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