ECB Governing Council member Olli Rehn has underscored the significance of core inflation in guiding the bank’s monetary-policy decisions. His comments comes at a time when consumer prices in eurozone are reportedly slowing, but not at the desired pace.

Rehn stated, “The rise in consumer prices in the euro area is slowing, but not to the extent desired,” further adding, “Inflation excluding energy and food is falling only gradually.”

Highlighting the primacy of core inflation – which excludes the volatile sectors of energy and food – in policy considerations, Rehn remarked, “I consider core inflation a very important, essential yardstick in the overall judgment of monetary-policy making.”

Rehn emphasized ECB’s commitment to bringing inflation back to its target, saying, “We will bring interest rates to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and keep them there as long as necessary.”

ECB Chief Economist Philip Lane emphasized the central bank’s data-driven approach in managing inflation. Speaking today he suggested that another interest rate hike is likely in July, provided there are no significant changes in the economic outlook.

“At this point, we are surely data-driven,” Lane stated, reflecting ECB’s commitment to making policy decisions based on economic indicators and trends. “July is not so far away, we can say unless there’s a material change another hike (is likely).”

Regarding further in September, however, Lane was more reserved. “But to me, September is so far away; let’s see in September,” he added.

Despite rising inflation, Lane remains optimistic about the medium-term outlook. “Inflation will come down fairly quickly in the next couple of years to ECB’s 2% target,” he predicted.

ECB Executive Board member Isabel Schnabel stressed the necessity of maintaining a proactive approach to monetary policy amid persistent inflation risks. In a speech today, she noted that “risks to the inflation outlook are tilted to the upside, reflecting both supply- and demand-side factors.”

Referencing IMF’s recent guidance, Schnabel noted, “The IMF has recently issued a clear recommendation: if inflation persistence is uncertain, risk management considerations speak in favour of a tighter monetary policy stance.”

She further explained the rationale behind this approach. “First, the costs of protecting the economy from upside risks to inflation are comparatively small, as the policy rate can be brought back to neutral levels faster than if policymakers acted under the assumption of low inflation persistence,” Schnabel said.

The second reason revolves around the high costs of reactive policies. Schnabel pointed out, “it is very costly to react only after upside risks to inflation have materialized, as this could destabilise inflation expectations and thus require a sharper contraction in output to restore price stability.”

Overall, Schnabel emphasized the need for data-dependent decisions that lean towards more action rather than less. “We need to remain highly data-dependent and err on the side of doing too much rather than too little,” she asserted.

She insisted, “We thus need to keep raising interest rates until we see convincing evidence that developments in underlying inflation are consistent with a return of headline inflation to our 2% medium-term target in a sustained and timely manner.”

Full speech of ECB Schnabel here.

ECB Governing Council member Peter Kazimir stressed today the necessity for continued monetary policy tightening to address prevailing inflationary pressures. he specifically highlighted the need for another rate hike in July to move further into a restrictive policy stance.

“We need to deliver another rate hike in July and move further into restrictive territory,” Kazimir stated. He underscored that a continuation of monetary policy tightening is “the only reasonable way ahead.”

Looking ahead to September, Kazimir cautioned that an updated analysis would be required to assess the impact of ECB’s rate hike cycle before proceeding with further tightening measures. However, he emphasized that halting rate hikes prematurely presents a “much more significant” risk than overtightening.

Kazimir drew attention to several factors contributing to inflation risks, asserting, “Upward inflation risks are still substantial, linked to the labour market situation, food prices and, last but not least, profit margins.”

In a chorus of comments today, ECB Governing Council members underscored the need for continued monetary tightening to combat persistently high inflation.

Bundesbank President Joachim Nagel stressed the central bank “still have more ground to cover”, adding “we may need to keep raising rates after the summer break.”

“Once we have reached the peak, we will stay there until we are sure of a safe and timely return of inflation to our 2% target,” Nagel said. He also highlighted the necessity of reducing the central bank’s balance sheet to support this policy.

Bostjan Vasle, Chief of Slovenia’s central bank, echoed this sentiment. “If it turns out that inflation is more persistent than it seems at the moment…then of course further monetary-policy action will be necessary,” he noted.

In Lithuania, Central Bank Chief Simkus expressed concern about the prolonged high inflation, asserting that “over the medium term, inflation is not coming back to an appropriate level.” He also questioned market expectations for early 2024 rate cuts, suggesting that such a rapid reversal would be perplexing.

Meanwhile, Estonian Central Bank Chief Madis Muller clarified, “Euro zone interest rates have not yet peaked.” He added, “The ultimate goal is clear for the central bank: we need to quickly get the price rise under control.”

Finally, Finland’s Central Bank Chief Olli Rehn, voiced the need for restrictive interest rates to achieve a timely return of inflation to the 2% medium-term target. “The key ECB interest rates will be brought to levels sufficiently restrictive…and will be kept at those levels for as long as necessary,” Rehn concluded.