The European Central Bank should “carry on and act consistently” with rate of interest walkings as it continues its efforts to deal with high inflation, policymaker Olli Rehn stated Friday.
Rehn, who belongs to the ECB’s Governing Council and guv of the Bank of Finland, stated that the reserve bank’s next rate choice will be “data dependent,” especially as it refers to stubbornly high core inflation.
Euro zone core inflation– which omits unpredictable energy, food, alcohol and tobacco costs– reached an all-time record of 5.7% in March, up from 5.6% inFebruary Headline inflation, on the other hand, fell substantially to a yearly rate of 6.9% last month.
“Inflation is still by far too high, and especially I’m concerned about core inflation, underlying inflation,” Rehn informed CNBC’s Joumanna Bercetche at the International Monetary Fund’s spring conference in Washington, D.C.
The ECB has actually raised rates of interest by 50 basis points at its last 6 successive policy conferences. However, Rehn stated the relocations have yet to have a considerable effect.
We have actually been reaching limiting area and it is necessary that we do not unwind too soon.
Olli Rehn
Governor of the Bank of Finland
“In my view, it is important that we carry on, and act consistently, but we have to calibrate our decision on the basis of an approach based on data dependency,” he included.
“We have been reaching restrictive territory and it’s important that we don’t relax prematurely.”
Asked whether Europe was poised for a duration in which rates of interest were held greater for longer, Rehn responded, “I would concur with that.”
He included, “Once we reach the peak policy rate, perhaps over the summer … then we have to keep the peak policy rate at a stable level for a sufficient period of time to see that core inflation is genuinely in a sustained decline.”
‘We can attain more with less’
Fellow ECB executive board member Mario Centeno likewise stressed the value of data-driven policy.
“The tightening is making its way through inflation,” he stated at the IMF’s spring conferenceFriday “In a sentence, with these global spillovers on global policy, we can achieve more with less. That’s my message.”
When asked by CNBC whether it was time for the ECB to pause its rate walkings, the Portuguese reserve bank guv stated “we need to look at what the data will tell us in the next few months.”
“Certainly, we are much closer to the terminal rate than we were a couple of months before. This is a very simple statement, though. And I think we need to read the data very carefully to understand that the monetary transmission mechanism are at work.”
The remarks come as a variety of ECB policymakers suggested today that they might be reevaluating the course of rate of interest walkings in the wake of last month’s banking chaos.
The ECB treked rates by 50 basis points in mid-March at the height of the banking tension, regardless of some require the reserve bank to stop briefly.
Yet, numerous ECB Governing Council members today kept in mind the threat of a knock-on financial effect of ongoing walkings.
“Quite definitely what we experienced with the bank crisis in the U.S. and with Switzerland, this led to changes in outlook and if the outlook changes, we have to change our views,” stated Austrian National Bank Governor Robert Holzmann.
Earlier Friday, Boris Vuj čić, guv of the Croatian National Bank, repeated that the bank’s upcoming choice would be “data dependent.” However, he recommended that a 25 basis point walking might be in the cards at upcoming conferences.
“It will be, as we say, data-dependent as to what we decide to do in May, whether we stick with the 50 basis points or we move down to the 25 basis points,” Vuj čić stated.
— CNBC’s Elliot Smith added to this report.
