The governor of the Bank of Portugal (BdP) said today that, after the summer, there may be greater predictability about the trajectory of ECB interest rates, as new data on inflation will have been received.
Mário Centeno was speaking at the presentation of the “Economic Bulletin” in June, at the Money Museum, in Lisbon, when he said that monetary policy should remain restrictive for some time.
The head of the Portuguese banking supervisor said that there may be "greater predictability" of interest rates after the summer.
Centeno's statements come a day after the president of the ECB, Christine Lagarde, said it was "very likely" that a new increase in rates will be decided at the July meeting of the Board of Governors.
The governor of the BdP reinforced that the ECB's monetary policy is decided meeting by meeting and based on data, considering that "anticipating the results of meetings is not a good exercise either for the credibility of monetary policy or of the ECB".
“The forthcoming ECB meetings are crucial for this [on the trajectory of rates]. The meetings will be held in an informative context that is not today's. We are going to find out what the June and July inflation is", he pointed out, also listing the reimbursement by the banks regarding the longer-term refinancing operations.
For the BdP governor, «inflation is really a disturbing sign».
“We all have to collectively make a huge effort to contain inflation. The ECB has its instrument, which is the interest rate, which acts very clearly in the economy », he says.
Mário Centeno underlined that the biggest challenge that arises today is the fact that there has been "a very rapid rise in the interest rate".
«We have had the need for this ascent to take us into restrictive territory. We are changing regimes, with low and very low interest rates, and this regime change needs time", he said.
"We haven't had that time, we have to be extra cautious about what the adjustment will be", added the BdP governor.
After the US Federal Reserve decided, on Tuesday, to keep the reference interest rate range unchanged, the ECB once again raised key interest rates by 25 basis points.
The interest rate on the main refinancing operations rose to 4%, the deposit facility rate rose to 3,50% and the interest rate applicable to the marginal lending facility rose to 4,25%, with effect from from the 21st of June.
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