Despite wage increases, the ECB should be able to quickly lower rates

(Boursier.com) — The European Central Bank may be able to lower interest rates “quickly” even if workers receive large pay increases to make up for two years of high inflation, according to Piero Cipollone, member of the board of the European Central Bank. “An excessive focus on short-term wage developments risks not taking full account of the wage increases that can – and must – take place if the euro area’s currently fragile recovery is to be built on a solid foundation. more solid,” said the official quoted by ‘Bloomberg’. “If the available data confirms the scenario predicted in the March projections, we should be ready to quickly reverse our restrictive monetary policy,” he added.

These remarks on rates from Cipollone are the most explicit since his appointment to the ECB last November and consolidate his status as one of the main dovish voices of the Institution. While other ECB members are broadly in agreement for a first rate cut at the June meeting, there appears to be less consensus on how quickly borrowing costs should fall, as uncertainty over the inflation remains high.

The rate easing process should take place “step by step”, and its effects on the struggling euro zone economy should be closely monitored, Latvia’s central bank governor said earlier today , Martins Kazaks. “The uncertainty is high and we have to be very careful here… We don’t want inflation to pick up again, but at the moment it seems that this dragon is grounded.”