The European Central Bank (ECB) defended that it is not possible to “declare victory” on inflation, warned that reaching the 2% target it is aiming for could take some time and set the target for the end of 2025.
According to Isabel Schnabel, member of the Executive Committee of the European Central Bank, who attended the 35th anniversary of Porto Business School on Thursday, “We cannot yet declare a victory over inflation, but we are on the right track.”taking into account the decline of values above 10% to 2.9% in about a year.
The head of the ECB said that, according to the institution’s base case, inflation in the eurozone will reach 2% at the end of 2025, but warned of the risks of this forecast and stressed that “monetary policy must be vigilant”. to see if “there are signs in the economy” that lead the institution to believe that the forecasts may be incorrect.
‘Our current restrictive monetary policy remains appropriate’he indicated, until the ECB is confident that inflation is on track to achieve the 2% target it is pursuing.
The official warned that what she calls the “last mile,” that is, the final phase of the decline in inflation, could take some time.
As risk factors, Isabel Schnabel pointed to wage growth and the resistance of some companies to lowering prices after raising them with inflation. Geopolitical issues, with the conflicts currently unfolding, could add some uncertainty to the equation, he indicated.
As for Portugal, the official highlighted the risks for households due to the weight of variable interest rates on housing loans and highlighted Portuguese investments in savings certificates, to compensate for the low profitability on bank deposits.
Isabel Schnabel spoke at the Porto Business School on the day it was announced that some members of the ECB Board of Governors are in favor of leaving the door open for further interest rate hikes in the eurozone.
This is evident from the minutes of the October 25-26 monetary policy meeting, published by the ECB on Thursday, which reflect the discussions that led the monetary entity to maintain interest rates at 4.5% after ten consecutive increases since July 2022.
Even while maintaining interest rates at the end-October meeting, some members believed the ECB needed to be prepared “to raise rates if necessary, even if this is not part of the current base case”.
Source: DN
