MNI BRIEF: ECB Rates Now At Level To Tame Inflation - De Cos
Bank of Spain Governor adds to voices suggesting ECB is done hiking rates for now.
The European Central Bank deposit rate now at 4% should be enough to bring Eurozone inflation back to 2% target “if maintained for a sufficiently long period,” Bank of Spain Governor Pablo Hernandez de Cos wrote in an article on Wednesday. (MNI INTERVIEW: September Rate Rise Probably ECB's Last- Simkus)
Monetary policy transmission is “higher than past episodes”, even if a significant part of the tightening is yet to be felt, de Cos pointed out as an argument that the interest rate peak has been reached. He also noted a weaker economic outlook for the euro area that points to “downward risks”.
Firms' margins have started to reduce in line with ECB’s expectations as have wage increases, he wrote in the latest BoS blog article. For that reason, he thinks inflation expectations are well anchored and sees price risks balanced: although energy prices could push up inflation but a further weakening demand or a more intense monetary transmission could go in the opposite direction.