MNI BRIEF: Difficult To Gauge ECB Transmission Lags: Madouros

It is more difficult for central banks to gauge the length of monetary policy transmission lags than in previous hiking cycles due to the considerable changes in the economy and the financial system, Central Bank of Ireland Deputy Governor Vasileios Madouros said Wednesday.

Certainly with reference to Ireland, Madouros said there has been a weaker interest rate pass-through for both deposits and for new mortgage rates compared to euro area peers, driven potentially by factors including the relatively ample deposit base of the Irish retail banking system and the evolution of competitive dynamics within the market for banking services.

According to Madouros, effective transmission of the ECB’s monetary policy to the domestic economy via the banking system is key for the fight against inflation. "Given historical patterns, we expect the banking channel of monetary policy transmission to continue to strengthen in the months ahead and will continue to monitor the transmission using a wide array of indicators and analysis,” he said.

The speed of policy pass-through has been a concern for central bankers on both sides of the Atlantic in this cycle, with many Fed officials of the view the process may have speeded up, contrary to the opinion of officials in the UK and Eurozone. (MNI POLICY: Fed Worried Shorter Lags Require More Tightening)