The European Central Bank (ECB) will cut its key interest rates sooner than it recently thought and should not wait until May to make a decision, as there are no signs of additional pressure on inflation, ECB policymaker Mario Centeno said on Tuesday.
Investors are betting the ECB will deliver multiple rate cuts this year, with the first move coming in March or April, though some policymakers have indicated it could take longer to be certain inflation is under control.
In an interview with Econostream Media, Centeno said the ECB’s terminal rate had already been reached and that he expected the central bank would confirm “in the next quarter” that inflation was on track to fall to the 2% medium-term target.
He said that annual inflation of 2.9% in the euro zone in December was “good news,” noting that the reading was “smaller than the market expected and less than the base effects incorporated in the forecasts”.
“The decision to keep nominal rates steady for the moment is appropriate and we will decide when to cut them sooner than we thought until recently,” said Centeno, who is the Bank of Portugal’s governor and a member of the ECB’s governing council.
“I can’t say when, but I can … say the most recent developments on inflation and the economy have obviously brought the moment of easing (of monetary policy) closer to us,” he said.
Centeno said he did not see “any sign that second-round effects on wages have materialized or will materialize or that wages will put additional pressure on prices”.
Asked whether the ECB should wait for wage data in April or May to decide on the direction of monetary policy, he said: “I don’t think we have to wait until May to make decisions”.
