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.
