European Central Bank (ECB) Governing Council member Mario Centeno said that the ECB should begin hiking interest rates in early July, along with a gradual tapering of stimulus.
With inflation in the eurozone soaring up to 7.5% last month, well above the ECB’s 2% target, several policymakers have called for the central bank to begin an interest rate hike cycle as soon as July.
Centeno said that normalization of monetary policy soon is “necessary and desirable,” and that it should be done gradually without policymakers “overreacting” to rapid inflation to not risk penalizing economic growth.
Centeno said that the ECB is likely to end its pandemic stimulus program by the third quarter of the year. “It is anticipated that this could happen in the first weeks of the third quarter,” he said at a banking conference in Lisbon.
“There are currently no structuring signs of de-anchoring inflation,” Centeno added, noting that “the balance of risks around inflation is skewed upward” with the ongoing war in Ukraine.
Centeno added that wage pressure due to inflation is “an additional risk which needs close and continued monitoring.”
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