Various officials of the European Central Bank (ECB) warned this Tuesday about the persistence of core inflationa reason for which the monetary entity will continue with the interest rate increases in the coming months.
Last May, general inflation eased from 7% to 6.1%, but the core indicator, which excludes energy and food values, dropped only three tenths from 5.6% to 5.3%and faced its second slowdown, after ten consecutive months of increases.
According to the member of the Governing Council of the ECB and head of the Bank of Estonia, Madis Müller, the increases in wages are behind the persistence of inflation.
“If wage increases, which recently accelerated in the Eurozone, continue this fast, then the decline in core inflation will be slower than we forecast”affirmed Müller in statements quoted by the Bloomberg agency.
This will also complicate, he affirmed, that inflation once again “be firmly anchored, in the medium term, at 2% per year”, a goal that the organization has.
Fears about inflation led the ECB to raise interest rates again last week -the eighth since July last year- which brought deposit facility, refinance, and marginal loan rates to 3.5%, 4%, and 4.25%respectively, the highest level in more than two decades.
After a rise in rates that is taken for granted at the next meeting in July, Müller avoided expressing himself about what will happen in September.
Some tougher members of the organization have already warned that at least two more rate hikes will be necessary, as they believe it is necessary to avoid stopping the hikes and then resume them again when verifying that they were not enough.
Olli Rehn, another member of the Governing Council representing Finland, said today that “the rise in consumer prices in the Eurozone is slowing down” but -he warned- that it is not occurring “in the desired magnitude”.
“Core inflation is coming down, but gradually”he said, and affirmed that said indicator is “very important” when judging monetary policy which, in uncertain times like the present, “particularly depends on focusing on incoming data” and not only on future forecasts.
“It is important that it is in a firm and sustained descent”added, and anticipated, in line with the statements of the head of the entity, Christine Lagarde, that the ECB “will bring interest rates to levels that are restrictive enough to achieve a return to inflation of 2% on time ( annual)”.
Source: Ambito
