Portugal’s central bank governor, Mario Centeno, expressed optimism about the direction of inflation in the Eurozone, countering recent hawkish sentiments from some members of the European Central Bank Governing Council. Speaking at the World Economic Forum in Davos, Switzerland, Centeno emphasized the focus on medium-term inflation targets rather than short-term fluctuations.
“We target medium-term inflation; we don’t target February inflation, and the trajectory is very positive right now,” Centeno told CNBC. He acknowledged that overshooting was not currently a concern but emphasized the importance of implementing measures necessary to bring inflation to the medium-term target of 2%.
Centeno highlighted the success of the ECB in anchoring inflation expectations at 2% in the medium term, attributing it to the institution’s credibility. He reiterated the commitment to data-dependent decision-making and noted the domestic nature of current inflationary pressures, with the earlier shocks subsiding.
Regarding services inflation, Centeno indicated that it is falling faster than the previous increase, presenting a positive trend. His remarks followed comments from Austrian central bank governor Robert Holzmann, who suggested a shift in data trends that might deviate from expectations of interest rate cuts.
When questioned about the potential timing of rate cuts, Centeno acknowledged recent surprises in inflation numbers but interpreted them as positive signs of tighter monetary policy taking effect. He emphasized the need to consider all available data when making decisions, particularly given the challenges facing the Eurozone economy, which has experienced stagnation for five quarters.
While German central bank chief Joachim Nagel mentioned on Monday that inflation is currently too high to discuss interest rate cuts, Centeno indicated openness to assessing data in the future, considering the unique economic challenges faced by the Eurozone.
