ECB must be cautious over fresh interest rate hikes says Centeno

Portugal’s central bank governor Mário Centeno said this week in the United States that the European Central Bank needed to think twice before making any decisions to hike interest rates again if I was to avoid risking negative impacts on Portugal’s and other member States’ economies.

The governor of the Bank of Portugal was speaking from Jackson Hole Symposium where he was taking part in an annual symposium organised by the US Federal Reserve.
“The negative risks for the economy that we identified in June have materialised” he said, referring to a slowdown in the Euro area economy, but did not suggest a breathing space from putting up interest rates. “We have to take this (slowdown) into account” he added in an interview with Bloomberg TV.
Centeno refused to predict what decision the ECB would take at its next meeting to discuss inflation on September 14, given that the ECB is expected to maintain rates as they are given deteriorating economic indicators.
The governor agreed that the last hike had been negative in impact, but did say that the ECB has geared its policy and decisions based on economic data and would not deviate from the line it had taken.
“A pause (in further hikes) in September? We have been reliant on data for our decisions. There is a lot of data to be released by September. We’ll have new forecasts that will inform the effects of monetary policy on inflation and the economy. We’ll decide this in September”, said Mário Centeno.
The Chairman of the Federal Reserve, Jerome Powell will give his keynote speech at the symposium today when analysts and the media will see if he will announce a rate hike or a stay on further increases to avoid pain for US businesses and householders alike.
At its most recent meeting in July, the Fed unanimously voted to raise interest rates to a range of 5.25-5.5%, their highest level in 22 years. Minutes from that meeting, released this month, revealed that central bank officials worried inflation wouldn’t slow further unless the labor market and US economy continue to cool down.
In April Centeno told Bloomberg that a pause or a slowdown in the pace of hikes was possible as headline price gains in the euro area retreated and wage data showed no domestic pressure.
In late July, however, the European Central Bank raised interest rates for the ninth consecutive time, but raised the possibility of a pause in September as inflation pressures show tentative signs of easing and recession worries mount.
Fighting off a historic surge in prices, the ECB has now lifted borrowing costs by a combined 425 basis points since last July, worried that price growth could be perpetuated by both rising costs and wages in an exceptionally tight jobs market.
But now he is arguing that the ECB needs to be cautious in its decision to raise rates again in September.
Jackson Hole is the Davos for economists and central bank governors and is considered to be the most exclusive economic get-together in the world.